Porsche (with Doug DeMuro)

it's definitely porsche porsche porsche yeah definitely don't say porsche definitely don't say the family says it more like like because i met one of them at one point they say more like not like porsche but more like porsche like but it's hard i think it's a german thing and i think it's difficult to but so we all say porsche porsche yeah if you say porsche with a german accent it comes out like porsche yeah so i think it's almost like yeah yeah yeah we will yeah that's probably exactly what it is who got the truth is it you is it you is it you who got the truth now is it you is it you is it you sit me down say it straight another story on the way welcome to season 12 episode 6 of acquired the podcast about great technology companies and the stories and playbooks behind them i'm ben gilbert i'm david rosenthal and we are your hosts today we tell the story of porsche if you liked our lvmh episode you are gonna love this one and not just because it's a european luxury brand there is possibly even more family drama creeping takeovers and complex corporate structures at play but why is porsche the brand and the product so special the company has struck an incredible balance of both building some of the world's finest supercars while also being a great daily driver unlike say a ferrari or a a a a a a a a a a a a a a a a a a a a a a a a a also being a great story on the line of which is it's the same as being a great super cars while also being a great daily driver unlike say a Ferrari or a Ferrari a Lamborghini of course these are expensive daily drivers with the average porsche costing a hundred and ten thousand dollars but they have managed to nail being a prestige brand with pricing power and make a ton of cars at three hundred and fifty thousand per year today we'll study how they cultivated such a vibrant community which conveniently for them is comprised of extremely wealthy people but it has not always been this way and it certainly didn't start this way today's story has nazis tanks the first electric vehicles and like most luxury brands some misadventures in the nineteen eighties oh yes and if you like quirks and features you're gonna be pumped about our partner in crime to help us tell this story Doug DeMuro Doug is one of David and my favorite youtubers and content entrepreneurs he operates the largest independent youtube channel focused on car reviews with millions of subscribers he also used to work at Porsche corporate and is about as big of an enthusiast of the brand as you'll find anywhere in fact we are filming this episode now sitting in his garage in front of a very special Porsche Doug's Carrera GT welcome to acquired Doug thank you for having me it's wonderful to have you here well listeners if you want to know every time an episode drops sign up for email updates at acquired.fm join the slack we'll be talking about it after this episode acquired.fm slash slack and without further ado David take us in and listeners this is not investment advice Dave and I and Doug may have investments in the companies we discuss and this show is for informational and entertainment purposes only to set the stage a little bit I think that even though it's a marketing phrase the German engineering thing it's worth sharing a little bit of history because it is more than just a marketing phrase right so there's a pretty long and incredible history of science and engineering in Germany and Austria it goes all the way back to the scientific revolution and Johannes Kepler and actually before World War II Germany had produced more Nobel laureates in scientific fields than any other nation in the world folks like Max Planck Erwin Schrödinger Kurt Godell and you know Albert Einstein these are all German and Austrian scientists and this tradition extends also of course to the auto industry so it is very likely that the first gas-powered transportation vehicle this looked more like a tricycle than a car but predecessor of a car was created by a German inventor in 1864 named Siegfried Marcus and I say probably because nobody really knows because Marcus was Jewish and the Nazis destroyed all records related to him during the war we're going to talk a lot about the Nazis here in a minute either way though Germany definitely did create the first car the first successful production consumer automobile it was a vehicle called the Benz patent motorwagen and that was made in 1885 by Karl Benz I recognize that name Benz indeed you probably do as do most listeners now around the same time another German inventor named Gottlieb Daimler sets up his own motor company and then in the early 1900s they have a model that they're producing goes on to be very popular is named after the daughter of one of their biggest dealers in their dealer network of course we are talking about Mercedes I had no idea that's where the Mercedes name came from yeah crazy so Benz and Daimler end up merging in 1924 and thus Mercedes-Benz is born but okay you might be asking what does this have to do with Porsche well turns out quite a lot because in 1906 Daimler squished the car to the German auto industry and the car was a little bit of a success and the car was a little bit of a success and the car was a little bit of a success 1931, he starts a consulting firm to kind of advise other car companies, not Daimler-Benz, but other car companies in Germany and Europe, and I think in America too, on their designs and do some work for them and maybe even design cars for them. And he names it the Dr. Ingenieur Honoris Causa Ferdinand Porsche Konstruktion und Börtingen für Motoren und Fersenbau. I apologize to any German speakers out there. Wow, you are. But to be fair to you, it's a lot. It's a mouthful. I studied French in college, you know, and that translates as the Dr. Ingenieur Honoris Causa Ferdinand Porsche Consulting and Design Services for Motor Vehicles Company. And this. This is the beginning of Porsche the company. And up until 2008 and 2009, which we will get to much later in the episode, that is the company that makes Porsches. Yeah. Wow. Yeah, I mean, if you look up, like, the stock of Porsche, and you pick the right Porsche, and there's a couple we'll talk about, that's still the full name of the company is all of his honorary things. So when he's starting this new company, he enlists the financial support of two people. One is his son-in-law. His daughter, Louise's husband, one Anton Piesch. Remember that last name, because it is also going to be very important as we go along here. And the other person is Adolf Rosenberger. Now, if you are a Porsche history nut, you probably know about Anton Piesch. You probably don't know about Adolf Rosenberger, because shortly after they start the company, Rosenberger was Jewish, and he gets arrested by the Gestapo. He gets imprisoned. He eventually bribes his way out and escapes to America. But during the war, Porsche and the Nazis totally appropriate his stake in Porsche, and he's written out of history. Wow. Okay, so this new Ferdinand company, in 1934, they land one very, very, very large contract that would go down in history, both for the company and the world. That contract would be to design Ferdinand's vision, the small, affordable car for the people, a Volkswagen, you might say, in German. That car would go on to become the Volkswagen Beetle. And the company that contracted Porsche to build and design it was Volkswagen, which was established to do so. By Adolf Hitler. I had heard rumors over the years, like, oh, yeah, there's like a Nazi connection here. Like, Adolf Hitler founded Volkswagen. Yeah, it's bigger than a connection. Yeah, there's not a connection because it's the same person. Right, it is the thing. Yeah, Facebook, I feel like that has some kind of like Zuckerberg association, but I've never really put it together. Yeah, yeah, there's some link between Mark Zuckerberg and Facebook. I just got to say, this early in the episode, we may as well like point it out already. It is crazy. How comfortable we all are driving Volkswagens and Porsches when it was like, not just a little Nazi affiliated, like founded by Nazis. And yet, the way the world has evolved, like, people kind of became okay with it. All the German brands. I mean, you know, most of them use Jewish labor in their factories at that time. And obviously, very different people run the businesses now. And so you just kind of put it out of your mind. And, you know, what generations have gone by also less so on the Porsche side of things, more so on the Volkswagen side. And I think that's one of the things, as we'll see with the history here, there is kind of a pretty incredible re-founding of Volkswagen after the war. Yeah. And I think if it were not for this re-founding that we'll talk about in a minute, it would not exist today. Yeah. But yeah, just wild, frigging Adolf Hitler founded Volkswagen. It's crazy. So the Beetle, this, you know, people's car, Doug, you might know this, did it go on to become the most popular car ever in the entire world? Probably. It is very hard to get actual production and sales data, especially for old cars. Especially for cars like the Beetle, which were produced in many countries over many years. I mean, they were building them in Latin America through a couple of years ago, maybe 2003 or something. And so it's like difficult to figure out. But it obviously, whether or not it was the most or one of the most, it was obviously the effect of that car is clear, you know, today. And I tried to think. I could not think of any other model. I believe the Beetle, the original Beetle was, is likely the single longest produced and largest, both in terms of length of time and number of units produced of a single generation model of a car like the Civic, the Mustang, the F-150, definitely has more than the Beetle. But like, those aren't the same cars, right? The Beetle was the same freaking car until the new Beetle in 1998. And it's interesting when you think about the Beetle, because young people today look at it as like a car. It's like a big, cute, classic car. But like at the time, it was what you drove to drive your family around. And we'll talk more as we get to post-war, but like in Germany at the time, it's like a real, you know, important, practical family car. This original Volkswagen, the Hitler Volkswagen, one of the things you can do when you start a company as a fascist dictator, you can create a new city to house this company in, which he did. So Hitler creates a new city. In Germany, known as the then called the city of the strength through joy car. That was the, what they wanted to call the Beetle originally. The strength through joy car. The strength through, that was like a Nazi strength through joy. Yeah, yeah, yeah. Didn't get much more German than that. Nope. Yeah, yeah. And this is Wolfsburg. Like, this is the city that Volkswagen is still located in today. Hitler created it. And not just Volkswagen, but like the Volkswagen group, one of the largest car conglomerates in the world that owns many other brands you're familiar with. All out of Wolfsburg. So Hitler creates Volkswagen. He creates Wolfsburg. They do start production of the Beetle before World War II starts. They only make about 200 units. These are super rare today. You find a pre-war Beetle. Then World War II begins on September 1st, 1939. As you would expect, Volkswagen, all the Volkswagen and Porsche operations get repurposed to making military vehicles. There's a bunch of dark stuff. Everything Doug, you mentioned earlier. Forced labor, concentration camps. This was the Nazi war effort. It all happened. We're going to skip over this period for our purposes today. But like, note, it happened. After the war, though, a whole bunch of really interesting stuff happens that basically fractures and separates out the Volkswagen operations from the Porsche operations for the next, the rest of the century and into the 21st century. So ironic. And that they are now one company again. Right. First off. Or are they? No, well, or are they? That's the question. And the funny thing is also they always, they danced around even in this period and then in the decades after that. And then, of course, now there was always kind of flirting with each other. Yes. So first on the Volkswagen side, I alluded to this a minute ago. It's a pretty amazing story what happens because you would think like there's no way you can't imagine that Volkswagen would survive post-World War II given what we now know. Right, that it was created by the guy. Right, right. The company. So what happens is Wolfsburg ends up in the hands of the British at the end of the war. And there's this whole crazy thing in Germany of like all the allied armies are coming in and literally Germany and Berlin ends up getting split into East Germany, West Germany, East Berlin, West Berlin. Wolfsburg is in the hands of the British. And remember, because it was a political organization, it wasn't a company before the war. Nobody owns it. It's this like orphaned organization. It's super unclear. There's no like proprietary. So the initial plan that the British come up with, they were going to dismantle the factory and ship it over to Britain and essentially have Britain appropriate the Volkswagen technology and operations. Like the Beetle was almost a British car. Yeah. But supposedly the British didn't want it. The British saw the plans for Volkswagen for the Beetle and said, no one's going to ever want to buy that car. It's crazy to think about now. And it gives you an idea of how the British would operate their car industry. There's constant missed opportunities. But they literally looked at like this, the drawn, you know, the few, the models that they had, the few that they had built. And they said, nah, that is, they literally said it is not commercially viable. Wow. Wow. So, okay. The British government kind of lacked vision for this, but a singular British person did see the vision for this. And that is the officer who was in charge of the territory where the factories were like on the ground. Managing it. Major Ivan Hurst, a legendary figure in Volkswagen history. He finds one of the pre-war production Beetles, the 200 that were made. He starts driving it around and he's like, hey, this thing's actually pretty good. I think we can maybe do something with this here. He also sees, and this becomes increasingly obvious as the post-World War II state of world affairs takes place here in Germany of like, hey, the Cold War is about to start. He realizes that West Germany needs an economic revitalization here. We need to restart German industry because, hey, the Iron Curtain is falling just to the east here. So he decides. amazingly proposes and convinces the british command to leave the factory in wolfsburg maybe easier than i thought because the british didn't want it apparently and also to place an initial order a seed order to restart the company for 20 000 beetles that the british military is going to adopt and use as their main military transport so not as like a tank but like not an armored beetle but like they're going to use it to drive officers and stuff around yeah from that seed order like that is now the new volkswagen so it's like yes hitler started it but then ivan hearst yeah yeah totally now one of the things that i find interesting about the beetle is that each europe was so war-torn after world war ii was the all these places were in similar situations to germany and that like the people needed to get back to work they needed to be able to drive and go places and each european country had their own beetle you know uk had the mini italy had the fiat 500 france had the citroen 2cv they all kind of looked similar wait these are all based on the beetle no no no but they all came from the post-war era where they needed something small and cheap to like remobilize the citizenry basically and so kind of each country developed had their own you know car that did that for each country but in germany of course the beetle became a global hit whereas in those countries it was more you know in their era you don't see a lot of uh citroens in yeah no but the 2cv was a huge huge car and the french just like the germans needed to get back to work needed to start building stuff again and also needed a cheap car to like cruise around it yeah super interesting so that's volkswagen but put a pin in them we'll come back to them in about 50 years uh because there's a lot more to say on on volkswagen and 50 years that's about how long they would make that one model of the beetle yes the new beetle would get introduced i think in 1998 and the first ones post-war were made in like 1948 so yeah crazy crazy isn't that wild it's insane okay so what about porsche well they have a bit of a different path so after the war and we should say during the war ferdinand porsche was designing tanks yes and other military trans designed the elephant anti-tank tank the most powerful land-based tank ever created a terrible but b like just the range of design talent that he had like he designed the beetle and he designed the largest anti-tank tank more than a couple years yeah and also some of the very first hybrid and electric cars in history but at that time battery technology wasn't advanced enough and so you're lugging around this huge weighted battery pack to get almost no juice out of it and so it didn't really go into production he was a genius this is also it runs in the family too many of his descendants are both engines and cars geniuses after the war ferdinand and the son-in-law anton were arrested by the french as war criminals tried in france they end up being imprisoned for two years in france and uh ben you did a little research on this yeah i think the technical thing they got him on which is why they only had two years was for the forced labor that they took the imprisoned jews and forced them to work in the factories but all the other war crimes that were stacked against them ended up not being charged and so quick trip in and out of prison quick two-year trip out of war criminal prison yeah so ferdinand's son fairy portia who had been working in the business i think a little bit before the war and then and then during the war too um he's also arrested for war crimes too at the end of the war he gets released after six months in the summer of 1946 and he and his sister louise are like what are we gonna do you know we gotta rebuild the family are we gonna restart the business let's go figure things out they return to the family's kind of ancestral home in austria and that happens to be quite convenient because during the last days of the war as stuttgart and other large-scale german military production facilities were getting bombed by the allies portia took about 20 or so of the best most talented engineers and production people that they had and they moved them out of stuttgart and they moved them to the austrian countryside so that they wouldn't be you know targeted by so that the allied bombers wouldn't know where they are and uh this is pretty crazy they are literally operating out of a sawmill in a farming village in southern austria named gmund we're talking about like a couple thousand people maybe that live in this area yeah and david are you getting all this from i know you read like five hundred dollars worth of textbooks on porsche so there is this incredible history of porsche called excellence was expected that was written by carl ludwigson and we have to owe a big thank you to him uh for the research for this episode this work is like i mean the photos the archive work that are in this this volume it's it's incredible i read a coffee table book that was like the complete illustrated history of the 9-11 because for this episode and this topic you want a visual history and so it's not like there's like two books and kindle books that we could do our normal amount of research on all this stuff is in these like huge heavy bound pictorial books these are amazing objects that like are being produced there's just such a like um like visceral tangible quality to them that is that we don't usually cover unacquired right okay so ferry and louise go back to austria they're there in gmund uh and uh they're like well what if we start a new company and see what we can do around here i mean there's some vehicles we can start fixing this is literally like the sony story if you remember uh when sony first got started in tokyo at literally the same time they started by fixing radios right porsche the services business the the second porsche company porsche construction in uh gmbh which is an austrian company that they start to do this they start up like fixing old you know military vehicles that are around there in austria unlike sony in tokyo though where there were a lot of radios in tokyo there weren't a lot of cars in gmund so pretty quickly they're like huh we don't have any more cars to fix up and uh bad business yeah well not a not a large market uh shall we say at this point ferry has an idea and it turns out it's a pretty damn good one he definitely liked and agreed with his father's vision for uh you know a small car a car for the masses a volkswagen but uh he always had one major problem with the beetle which was that it was slow and it just was not fun to drive so during the war he actually had a custom beetle made that he drove during the war uh with a supercharged engine and uh ferry said later in a 1972 interview i saw that if you had enough power in a supercharged engine you could small car it is nicer to drive than if you have a big car which is also overpowered and it is more fun on this basic idea we started the first porsche prototype to make the car lighter and to have an engine with more horsepower doug can you contextualize what a big moment in like world history this is yeah i mean it's an interesting concept because sports cars in general weren't a thing that much they were and there's going to be people around and say no there were a lot of sports cars before but it was really a thing of uh real enthusiasts wealthy people that sort of thing would buy cars to go motor racing in the era of you know brass era and that kind of stuff the concept of creating like something more affordable littler that was still fun was like it was kind of an interesting idea that you know this was a real it was a touchstone of a concept that has really been taken obviously by them and refined and others as well i went in research when i looked up you know some of those sports cars pre porsche and you look at them and things are like franking cars they are huge right and the engines are like the engine bays in the front of the cars are two-thirds of the length of the car there's this one ferrari from that era and i look at i'm like how do you even steer this thing like it looks like a boat the thought at the time really was you want to go faster more more power which of course creates more weight which of course creates more weight but you're not going to be able to go faster you're not going to be able to do that but it was unwieldy yeah i mean even like to this day the carrera gt sitting behind us that's not a large car right and that was a porsche thing and it was an even more of a porsche thing at at this time totally and david you said a word there that if people aren't into cars they may not know this supercharged doug what does it mean to supercharge a car basically you know an engine takes in air and that's kind of air helps air mixes with the fuel and it works supercharger push like pushes in even more air to create more power basically so the term supercharged would be referring to like takes the same engine but adds this thing to kind of force more power through to like literally force more air in yeah and then i don't think turbos had been invented yet and turbos would obviously become a big thing for porsches much later the concept of turbo is actually fairly similar to supercharging except that it spins something that adds even more air basically and and thus turbochargers result in power. power kind of being produced as the car makes more power, it makes more power, if that makes any sense. It kind of like spins itself up in a faster way. And there's kind of pros or cons to either of them. And for those following along at home, this is like end of the 40s, 1947 type era. Yeah. Those couple years after the war when everything was kind of getting figured out. Yep. So Ferry has this idea. He's like, oh, I liked driving my supercharged Beetle. This was really fun to have a small car that also had a lot of power in it. What if we take this small operation of our elite team here in Gemund and we try and build a car that does that? And hey, it also turns out that, well, we built the Beetle. So we know how to work with the Beetle. There are a bunch of Beetle parts around. The Beetle was the main kind of chassis platform for a lot of military vehicles for Germany during the war. What if we take a lot of those parts and the basic architecture of the Beetle? Which is a rear mounted air cooled engine on a small car. And we try and put something together here. And this becomes the legendary Porsche 356. For some context on this, you can buy an old Beetle today for, I don't know, 10, $15,000 at auction. Maybe even a Beetle, like a classic one from the fifties or sixties. 356 is regularly sell for about $300,000 at auction and special ones go for well, well, well above a million. This is a big idea. The gulf between a Beetle and a 356 is large. Doug, why is the desirability of these cars so different today? Well, I mean, production numbers is probably the biggest component of that one, right? They made literally a zillion Beetles. And the 356 is special because it really kind of was one of the real touchstone moments of the sports car coming out of the war, how we define the sports car today. It was a special thing and it was a special time and a special moment. And a lot of them also weren't treated all that well. Ultimately the 356, it was not affordable, but they made a decent number of them. They got to be relatively cheap. It was the old used Porsche for a while in the sixties and seventies. And so not that many of them were saved. And now it's kind of revered as when we look back as, as this major moment in Porsche history. Yeah, this was another thing. So obviously in Camoon and then, and then even when Porsche moves back to Stuttgart here in a minute. Um, their production capability is not nearly as large as Volkswagen. So they need to price these things pretty high. They priced them at $3,750, the German equivalent of $3,750 in the late forties. That's about $42,000 today. But we're talking about war torn Europe that you're trying to sell this in. Like that's a lot of money. Here's the crazy thing. There's a market for that. Even in war torn Europe for a $40,000 sports car. Like there are enough people who it turns out are interested enough in Ferry's vision for a small, fun, fast sports car. Initially it was slow. It took them a while. The first couple of years, they only made like a couple hundred of them or something like that. It was initially pretty slow, but then things started to kind of kick around. People in Germany started to get some money and things started to take off. Yeah. It may be worth pointing out also in the context of the sports car, like the $350,000 coming out of world war two was kind of the beginning of the sports car really taking off. Like I mentioned before, it was the earlier ones were these big giant things that were only operated by enthusiasts who know how to work them. But like post-world war two, there was a lot of optimism. There was more in Britain. It was happening to MG was coming out with their sports cars, Austin Healy, Jaguar. These cars all kind of were born from this post-war period of like, Hey, these cars have been refined to the point where we can use them and drive them and enjoy them. And that really became a thing. And in Germany it was the $356,000. So that takes us to the late forties here. They're starting to produce the 356 in Camoon. At the end of 1947, Ferdinand Porsche and Anton Piesch get released from French prison. They come back to Austria, the families all together, and they kind of got to decide what to do here. Right around that same time, Volkswagen's getting back up and running. You know, Hearst is running it. It's, it's like the vision they're going to make the beetle for, for Germany and for the world. They come back to the Porsches, and they say, Hey, we still want to do business with you. And in fact, we actually want to expand the scope of our business with you guys, uh, even more than it was before the war, because we could still really use, you know, technical design consulting work and really leadership from you individual Porsches here at Volkswagen. I mean, after all you designed the beetle to though, now, you know, we're not a government organization in the same way anymore. You guys have this new Austrian Porsche company that you've set up. So how about this? They propose two things. One, they say, let's reinstate that old German Porsche company, the doctor, engineer, honoris causa, blah, blah, blah. Uh, we'll recreate the German Porsche company. It'll resume doing the design and consulting work for us here at Volkswagen. In return, they give that German Porsche company, literally the sweetheart deal of a lifetime, a royalty on every beetle sold worldwide. No way. Yes. Yes. This is how intertwined these two companies are. Yep. So sorry. The deal is we want your Austrian company to distribute our Volkswagens. And in order to coerce you to doing that, we're in the consulting work. We also want the consulting work. Okay. But, but Ben, you're on the right track. This is a, this is a hell of a sweetheart deal for the Porsche family. I mean, you are right to be saying, why would the German government do this? Do you know what kind of royalty? It was enough that it was, it was very meaningful, very meaningful cashflow. And probably not even at the time, not even clear just how amazing it would be. Right. Nobody knew that the beetle was going to become the international hit that it would, but, but it also, the German government did know that this was a lot of value. And they also may or may not have known, that on the Austrian Porsche side for the dealership distribution side, that was also a lot of value. So we're not going to talk as much about the Austrian operations of Porsche for the rest of the episode, but it becomes a huge business. So by the time in the early 2000s, when it all gets consolidated back into one company, for most of the two separate histories, that was the larger company by revenue. So the Austrian Porsche company becomes the largest car dealer network in Europe, not just for Volkswagens, but for all types of automotive brands. They're doing billions of annual revenue within a few years here. I mean, what an opportunity to be given a distribution network, just as the car is starting to become like a big thing. Exclusive distribution rights to Volkswagens. And they're in countries, not just in Austria, they're all over the place. Yeah. All over the place in Europe. And even more incredibly, so what the family decides is that Ferdinand and Ferry, the original Ferdinand and his son Ferry, they're going to move back to Stuttgart and retake over the kind of German operations of Porsche. Louise and Anton, the son-in-law, they're going to stay in Austria and run this dealership business. Anton dies in 1952, and Louise is the one who builds this business. Like Louise and her children turn that into this huge, you know, the largest car dealer network in Europe. Wow. Doug, the way the value chain evolved for selling cars, there's this very clear delineation, in the U.S. at least, until Tesla, of separating the dealership from the manufacturer. There is no direct-to-consumer. Was that already, like, obvious at this point in history when Porsche kind of has these two different companies? It's an interesting question. I suspect the answer is more or less. In some brands, I bet they were selling direct-to-consumer, and in some, I bet they weren't. Some of the smaller ones, maybe. I suspect the reason this worked out is because Volkswagen didn't, I mean, these companies didn't want to be the ones who were distributing all these cars across and doing all this. They were focused on manufacturing. I think there also might have been a technical reason, which is, even though this new Volkswagen was reconstituted as a company, its only shareholders at this point in time were the German government. So both the national West German state and the state of Lower Saxony within West Germany, which still to this day holds 20%. 20% of Volkswagen, which is crazy. Yeah. Yeah, they would IPO Volkswagen, I believe, in 1960 or 1961. So it was, even though it was a company, it was a German national company. And so to operate in other states, other countries in Europe, they probably needed third parties. Yeah. Wow. Yeah, wild, right? All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security, picture. It used to be that you prove that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI first world, that doesn't hold up anymore. Yep. Your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote shadow AI running with no security review at all. Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning the They've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's governance, risk, and compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half. In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment. And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at Vanta.com slash Acquired. That's V-A-N-T-A dot com slash Acquired for $1,000 off. And just tell them that Ben and David sent you. Okay, so Ben, you hit on this a minute ago. What the hell? Why is the new Western-controlled, West German, post-Nazi government giving this deal of a lifetime to these former Nazis? And it's not just we'll pay you for the cars you distribute that we make. We will pay you for all cars that we make, every Beetle, regardless of whether you distribute it or not. Yes, yes. Yes. To the German company. And then the Austrian company has exclusive rights to distribute it. It's a crazy deal. So here's what's going on. It actually, as crazy as it sounds, makes sense. So we talked about a minute ago, the Iron Curtain and the Soviets, like, it's so hard for us to remember now, but Germany post-war was ground zero for the Cold War. Like, the battle against the Soviet Union was happening right there, right next door. And so for the. West, reconstituting the West German industrial base was of paramount importance. So, like, the Marshall Plan that people probably know about, like, this is why the Marshall Plan happened. And this is essentially part of this philosophy of, like, we don't care that these people used to be Nazis, but for Porsche, for Mercedes-Benz, for lots and lots of German industrialist companies, the reason that they get restarted and re-injected with steroids, so to speak, is, like. Hey, we got an existential threat next door. We got to rebuild. We got to make some cars. the industrial base. Now, the deal that they give them does come with an implicit string attached, which is they basically say to Porsche and other companies, we're not really going to give you a license to print money. Instead, we will give you a license to essentially create enterprise value. So what West Germany does is they create. They create one of the oddest tax incentive systems I've ever seen. So for ordinary people in West Germany post-war, the tax rate was very low. The maximum amount of taxes that any normal person would pay would be, like, 15%, 20% of your income. But for these new old industrialists above a certain income, Germany sets the marginal tax rate at 95%. Whoa. So they basically. To cap your income. Yeah. Like, people are complaining, oh, you live in California? Oh, my gosh. You're paying 13% state income tax on top of federal. Like, imagine if the marginal tax rate were 95%. Right. You would just have no incentive to earn any additional dollars. Right. And that's on the personal side. It's equally bad on the corporate side. Any profits are taxed. So what are they trying to do here? They're trying to incentivize capital reinvestment in the industrial base. So they're basically saying to Porsche and others. Set all this up, and we are going to create all the incentives such that you will plow all of the money, all these royalties we're giving you from the Beatles, et cetera, into building up your production capabilities and investing in R&D and new models and et cetera, et cetera. And, I mean, it sounds crazy on paper, but, like, my God, it actually works. Like, and it works really freaking well. Do you think there was some guarantee that the tax rates would lower someday? Maybe. And I think they did. But as we'll see, Porsche becomes, like, it becomes pretty institutionalized there of, like, don't take profits. Instead, reinvest them in new models and R&D, racing, to the great benefit of the brand. Yeah. So I mentioned one of the things that Porsche invests in over the years is race cars and racing. And this is super interesting. None of us are. Racing historians. That's a whole nother branch of the automotive industry. So here we're in the late 40s, early 50s. Racing in this era doesn't look at all like it looks today. It hadn't professionalized yet. So the line between consumer enthusiast car market and professional racing market was very blurry. Very, very blurry. Right. And it turns out that. Even though, you know, manufacturers, including Porsche, would make special versions of cars for racing for Le Mans, being the most famous race at the time, you know, and others around the world, it wasn't like. Like, you look at an F1 car today or you look at a Le Mans car, like, there is no connection between that and something you can buy. And you or I would not be able to even operate it. So a super obvious point to illustrate this is folks are probably, you know, know names like James Dean or Steve McQueen, these famous. These famous Hollywood actors that were known as, like, you know, they did all these race car films. They were also professional race car drivers. Yeah. Professional as it were in the time period. Yeah. They competed in, like, real races in addition to being actors. Imagine Brad Pitt jumping into Le Mans. Right. They'd. Well, I was about to joke, they'd kill themselves. James Dean did kill himself in a Porsche 550 Spyder, which Porsche. Porsche would make a kind of dedicated racing-type vehicle, although it was also a consumer production vehicle, the 550. That car, that never would have happened if Porsche wasn't incentivized to invest all their profits. Like, I mean, maybe you can say, like, the legendariness of that car. I mean, they sell for, what, $5 million plus today? Yeah, real 550 Spyder. They only made 90 of them in the end. And so, like, it was a car that, in theory, you could go and buy. But while the 356 was, like, the sports car that you could gentleman race, the 550 Spyder was for people who, like, were really, like, let's go racing and, like, do it. But like you said, you could. A person could walk into it. Not a dealership necessarily, but, like, just order one. Yeah. But it is an absolute legend. It totally is. Yeah. You kind of see this trend, this moment where you see the bifurcation between anybody can do it and what the very best of the world kind of look like. That seems to be true across everything in the world today. In the way that, like, what Taylor Swift is doing on the stage on her tour has, like, nothing to do with, like, a person who picks up their guitar and is talented and plays at the local bar. Like, she is the SR-71 pilot. And this, you know, playing on a local bar stage is flying a Cessna. And the machinery to do so is entirely different. In the same way that you're talking about car racing splitting at this moment in the early 50s. Yeah. So, back to racing. We were talking about the Spyder a minute ago. I got so excited about James Dean. But, Doug, to your point, 356s in 1956. 1951 and 1952 win their class at Le Mans. They don't win it outright. Like, other bigger, powerful cars win it outright. But they win their engine classes at Le Mans. And these are, you know, yeah, they're modified a little bit. But, like, you basically buy them. Right. Yeah. And that was kind of a special thing. But that was the point of those classes. It was that there were cars for people who could kind of go buy a car off the street and modify it. And I think this was pretty unique to Porsches at the time. Certainly, you could go buy Ferraris. And Ferraris competed and whatnot. But, like, again, like we were talking about, the Ferraris were a different thing. Yeah. These weren't 356s. And I think they were probably also a lot more expensive than, you know, $3,700 at the time. Plus, an important distinction between Porsche and Ferrari in this era is that Porsche was largely focused on road cars. And then the road cars went racing, except for the 550, which was kind of built, purpose-built for racing. And there were racing versions of the 356. But the goal was mostly road cars. Whereas Enzo, very famously. He just wanted to race. And he hated his customer, his road car customers, deeply. It wasn't his thing. He only sold road cars to kind of finance racing. And a lot of the road cars that he ended up selling were either based on race cars or just former race cars. That he would do, I'm done with this crap. Whereas Porsche was selling, I mean, 356s were, like, being sold. Right. In pretty good volume. There's this great, great, great Ferry Porsche quote about this, which he would say later about the 911. But I think this also applies. In early form to the 356, the quote is, And, like, that's such a unique thing, especially in this era. Like, one car. And it remains true. It's kind of like Porsche's thing to this day. Like, how relatively usable the car is in just about any setting. Like, you can drive it to work. You can actually take it on a racetrack. That, like, has remained. sort of an ether, whether or not it's constantly fourth star for them, it is what they do more than anybody else. Yeah. I was trying to think of like what the right, um, kind of other luxury brand analogy is here. Porsche definitely is a luxury brand. It's not like we're, uh, making, uh, apples and oranges here. Um, it's kind of like a Rolex to me. Is that right? Like, what do you think? Yeah, absolutely. It's, uh, you buy those watches to wear them. You don't buy them to keep them in a case and ogle at, you know, they're steel. They're originally made for people who are swimming the English channel or scuba diving. I think it's reasonable to also compare it to like continuing in the luxury world, like a Ramona suitcase. Those aren't that expensive. They're three times, four times more expensive than regular luggage, but like they're not a Louis Vuitton truck, right? And so, but they're a lot more usable. You buy it to use it. It can kind of get a little beat up. That's why it's made out of stainless steel. Also, I think that's probably the right, it's not a Birkin bag. Like brands like this are so valuable because it has both the breadth and the depth. Like there are enough people who are like, I love Porsches because they're my cars. I can actually drive, but they are supercars. Yes. This thing behind us goes 200 miles an hour. Yeah. No, this thing behind us is a little bit of a difference. And there have been, and we'll get to, and we, and the 550 Spyder is one of them. There have been some Porsches that kind of go one way or another in the philosophy, but like generally speaking, it's sort of a middle of the road going back to Ferry's quote about this exact thing. It's sort of a middle of the road going back to Ferry's quote about this exact thing. Yeah. Doug, one question for you. I'm going to keep going to you for terminology. David mentioned Le Mans. What is that? Le Mans is like, there are various car races that are considered sort of the big car race, right? Like the Indy 500 is the car race of that racing series. Le Mans has always kind of been a place to prove technology. It's a 24 hour race. So you switch drivers, but it's like the endurance and the capabilities of a car and of a manufacturer over that time, period. It's really serious. It's always raining and it's always a disaster and it's in the middle of the night and it's difficult. And so like being able to win or win your class, Le Mans is like the Monaco Grand Prix, the Superbowl, if you will, of like vehicles racing in that sort of race series. There's also this like, you know, Porsche would, I think probably advance this argument that relative to the other races, it's closer to like what you want for a all around car that would also be a drivable car because like fuel efficiency matters. It's closer to like what you want for a It's also a road race. So it's not on a racetrack. It's literally on, they closed down roads in the French countryside and race on the road. And so there's like some component of like, instead of purpose building a car for a circuit, like cows were using this road, you know, two days before. Yeah, right. Totally. So on the back of all this success and like James Dean and Steve McQueen and all this, as you would imagine, Porsches start to become quite popular in America. So in 1954, Porsche, which I don't, I don't think Ferdinand and Ferry, like envisioned, like we're going to sell cars in America. This wasn't part of the business plan, but in 1954, Porsche sells 588 cars in the U S which was 40% of their entire production for the year. And that 40% basically stays constant, goes way up for a while in the seventies and eighties, but, um, kind of never dips below that. Like America is a huge market for Porsches. It's amazing to think that 588 cars was 40% of Porsche production. I agree with you by the way, your point that they didn't really have America in the business plan. It's one, one thing to provide some context is important to keep in mind. The number of like sports car startups happening in Europe at this time was significant. Most of which listeners, viewers will have never really heard of because they all died. These came up, they, they showed up, they, they raced a little, they sold some cars, they failed. And that there were tons of these. There was no concept that Porsche would be more successful than any of obviously the family hoped it would. And it became that way, but so many families hoped theirs would too. And they know, grew and grew and grew. Well, uh, part of it was the incredible success of the cars. Um, a big part of it too, was the royalty on the Beatles. That's a nice steady source of cash flow that you can invest in your operation. With forced reinvention. So you're doing stuff like racing, you're doing stuff like looking international. You're like, what can we invest in that? Like, we're not sure if it's a ROI positive investment. We could be speculative because we know we got the money coming in and beetle continues to be more and more and more it only continues to embolden them to reinvest. Right. So speaking of reinvesting, as we get to the 1960s, like the three 56 is great. This is amazing car, but it's kind of, I don't know, Doug, where, where you would put it in my mind. It's kind of, it's not quite a modern car. It's like, it's like close, you know, it's not a model T, but it's, it's, it's, it's not a, right. It's not a nine 11. Right. Right. Right. And, and what was starting to happen was the three 56 was one of the leaders of the charge of the sports car in that era. And what was clearly starting to happen was other sports cars are showing up that were refining some of the principles. Yes. So we're now in the sixties, Ford announces the Mustang Jaguars got the E type. Um, Chevy comes out with the second generation Corvette, the stingray and all these are starting to show up all. Yeah. Austin heel. Everything is like, okay, there's a lot of pressure. Yep. So, okay. In 1962, ferry Porsche makes the decision like three 56 is amazing. You know, rebirth of the company. Uh, invest profits and replace it with a new model. So for a couple of years, Porsche had actually been working on a design for a sedan for a larger model. Seems heretical now. Right. I mean, people look at the Panamera, right. You know, it was actually like going to be the second model of Porsche. Um, I mean, I feel that way. Every time I see a Panamera drive by, I'm like, why does Porsche make this car? But I see them driving by. So that's why they make the car. China is why they make that. We'll get to that later. So the next generation of Porsches, Ferry's son, Ferdinand, uh, known as Bootsy named Ferdinand named after his grandfather, founder of Porsche, what was working in the company. And he had been leading the body design for this larger sedan that Porsche was going to make ferry decides for a bunch of reasons that to cancel the sedan project. Um, probably the most important reason was, um, kind of, I don't know how much of this was government motivated and how much of it was just sort of like a cabal of like, Mercedes and BMW, like they were the sedan makers and Porsche maybe could have challenged them, but it was like, Hey, you know, they've got their turf. We'll keep our turf and sports cars and everybody will be happy here. Anyway, they decided to cancel the project and, uh, double down on sports cars at the same time, Ferdinand Porsche Bootsy, the grandson, his cousin from the Austrian side of the family, Louie's and Anton's son also named. And Ferdinand, Ferdinand Piesch, he's also joined the company. These two young Turks, the grandsons Ferdinand are here in the company and Piesch is working in the engine department. So it turns out that he's a pretty brilliant engine designer. He comes up with, and I believe even as a young kid, Doug, you may know more about this history. Like I think he really was the one that led the development of the six cylinder boxer engine. Porsche. Now he didn't invent the six cylinder boxer engine, but the engine that ends up in the nine 11, that is like still to this day, the model for the nine 11 engine comes from him. I think he's working on it for a racing car project that ends up not coming together. Ferry says, okay, let's take these two kind of failed projects that, you know, the next generation's working on. Let's weave them together. Take the styling that Bootsy's done for the sedan, take this amazing engine that Ferdinand has built for. The racing operations. And, uh, let's see what happens when we put them together. And this is the birth of the Porsche nine Oh one, the nine Oh one. David, I'm not familiar with that model. What is that? Well, uh, so this is why I mean, Doug, I'm sure you do this. Oh, this is a famous, famous story. I had no idea. I think most people have no idea. The nine 11 is only called the nine 11 because Peugeot, of all companies had a trademark in France for any car with a model name of any number, any Roman number with a zero in the middle and then any other number. So X zero X. And in fact, all Peugeot cars, even to this day are named 205, 206, 207, 208. That's the two series, the 308, 408, 508. And so they trademarked them all just knowing that eventually that would, that would happen. Unbelievable. So, I mean, it makes sense. Porsche is like, well, what do we do? Really not sell in France. I mean, France wasn't like the biggest market, but it wasn't a small market. Now the story that I hear have heard about this is that they said, well, we got these badges that say nine zero and one. Why don't we do nine one one? Because we have the nine and the one already. Hence the nine 11. Now all the nine 11, some of this may be more apocryphal than others. One of the things that I don't understand is why they wanted to call it car the nine Oh one in the first place. And I was never really able to get great information about that. The three 56 was the 356 like engineering project they did. Yeah. But did they really do 500 engineering projects between three, six and nine Oh one. So a couple of details that I got on this from a excellence was expected. I believe could be wrong on this, but I believe nine Oh one was the name of the engine project that Ferdinand Piesch was working on. And I think, I think that's the origin of it to yes. In Porsche lore, it's that like the reason these model numbers are like, these are the engineering projects that they start, but that's totally apocryphal. Like, - They jump around all the time. - And now they go forward and backward. Yes. Going back to the very, very beginning of the consulting company, they started with type seven or project number seven because they didn't want to look like they were a brand new company. So like, oh yeah, we've already done six projects. This is project number seven. I forget who they were working for. It's like when you're starting a new company and you're sending your first invoice, you don't call it invoice number one. It's exactly. So like, yes, the lore is that, you know, all of our projects have model numbers and like the BS. Right. So funny. And to be clear, so I admired designs of Porsche cars before doing the research for this, but knew basically nothing about the company or its lineup. I've certainly never owned one. And it took me a long time in the research to realize that there are a lot of car designs that start with nine that are all 911s. There's like, I don't know, I didn't write them all down, but the 964 and the 959. It gets better. It's complicated because what ends up happening, just like happens to every car, is they start to get redesigned as they get, you know, as the years go on, they need newer models. They still call it the 911. The only way to distinguish the newer version from the older version is to call it by the project number, which is 964, 993, et cetera, et cetera. And so if you're really into it, you got to know not just that it's a 911, but which, you know, version it is. And not all 911s say 911 on the back. So you can't even like use that as your reference. It's a little complicated. Maybe that's part of the success. There's like sort of a language you have to speak in order to like get Porsche to an extent. And there's something to that. Well, I think it's really brilliant. I don't know how much this is intentional versus it's evolved this way with the brand. But like, to me, it's just so brilliant because there is this tribe language to Porsches. If you see a 911, you know instantly that it's a 911. It is iconic. It's one because they've essentially kept the shape the same for the sense, the sense this since 1962. Yeah. So pretty immediately, like this car is a big hit. 1962 is when they start working on it. They first start selling it in 1964. They sunset the 356 in 1965. And so 66 is the first year that's fully 911 for Porsche production. They sell almost 13,000 cars in 66, which that's what, what did we say? 10, 12 years ago, they only sold. Yeah. 40% of their production. Like a thousand total. So they're now 13X in 10 years. And that number of almost 13,000 911s they sell was 15% more than their best year with only the 356s. Like, Doug, how would you characterize? Like what is, what, what makes the 911 so special? It's important to keep in mind at the time you didn't know, right? It was just like this thing, this like sports car they had come up with. And again, there were a lot of sports cars and it ended up happening is that this car has become symbolic of the sports car. And I think a lot of people would, if you were told to mention a sports car, they would say the 911. It just has become like the car. And it was like you say here, it was clear very early on that it had something special in this great combination of, you know, reliability, comfort, practicality, just like the 356 had been, but just better. Yeah. To my thinking, the flat six box engine, which was a great engine that Ferdinand Pietsch designed to go in this first 911. There's something like cool and unique to that. Like we've been talking about the difference between Porsches and other cars here. This is a performance engine, but it's a six, right? It's not an eight and it's rear mounted, right? So the 356 had a boxer four to explain what a boxer engine is. You know, a lot of cars, most cars have, well, these days, most cars have inline engines where the cylinders are in a line. A lot of other cars in the past have had V engines, where the cylinders literally make a V for balance. The boxer engine, the cylinders are literally like across from each other. It's flat. They call it a flat engine or a boxer because the cylinder heads look like they're boxing each other as they go back and forth. And the benefit of the boxer engine was that it's got this great balance to it because it's like literally flat in the car. Yes, it was unusual. I don't think it was necessarily unusual to do a six cylinder engine, although as time has gone on, it has started to become more unusual, like that the police cars still have six cylinders, even as Vs. V8s and V10s became V12s became more popular, but it was the thing. It was what they did. And it was part of that ethos of keep it relatively light, relatively simple, and like strip things down to the core essentials of the car. An average person can walk off the street, buy one, operate it. That's right. Drive to work, have a great time. It wasn't crazy fast or anything else. Yep. Now, the 356, the old 356, it had four cylinders. And so now the 911 have six cylinders. Like you said, it's not a world-class, powerful, fast car, but it elevates the 356 into a much more like you can really achieve a lot more with this than you could with the 356s. This becomes super important from a business side for Porsche because they priced the 911 about 50% higher than they had the 356. Now, what they do at first, they realize this is going to be like a major price gap in our lineup here. We're going to lose a lot of customers by elevating. So they do a stop gap at the same time that they introduced the 911. They also introduced the 912. And the 912 is a 911 with the old 356 four-cylinder engine in it. So they essentially downgrade the 911 to be the entry-level model only as a stop gap. They don't want to do this permanently. They sell about three quarters of the unit. The 912s, the cheaper four-cylinder ones, and one quarter of their sales are the more expensive 911s. The profit margins, though, on the 911s are so much higher. So Ferry starts thinking like, okay, and this was part of the plan all along, I think, let's create a whole new model. The old 356, we're going to bifurcate it. Our performance, real enthusiast customers who are willing to spend and that we're going to make great margins on those models, that's going to be the 911. Let's create a new car that can replace, can be the entry-level Porsche. We'll eventually introduce the Boxster. 20 plus years later, it takes Porsche a while to really get to the perfect end state of this strategy here. But for this new car, Ferry says, hey, we're not really equipped yet to be running multiple lines as just us, Porsche, the company. We need a partner. For this new car, let's turn to our good old friends at Volkswagen and jointly engineer and produce this new car with them. So in 1967, Porsche kicks off a joint project with Volkswagen to produce a new mid-engined Roadster, which is a smaller, more compact car and mid-engined, not rear-engined, called the 914. And the idea is that they're going to make both a four-cylinder and a six-cylinder version of this. The four-cylinder version is going to be a Volkswagen. The six-cylinder version is going to be a Porsche. And Ferry puts his nephew, Ferdinand Piesch, in charge of this joint project with Volkswagen. A very fateful decision, as we shall see. Now, what ultimately happens with the 914, there's a change in CEO at Volkswagen, and the new CEO definitely sees the value in deepening the relationship, with Porsche, and specifically their relationship with young Ferdinand. So he wants to continue the project, but he's like, I actually don't think that a sports car makes sense in the VW lineup. Why don't we just have all of these be Porsches? So the plan was originally to have some of the 914s be branded VW, and some of them be branded Porsche? Volkswagen had made a little sports car called the Karmann Ghia, previous to this, in the 60s. And so the thought was, they wanted to replace the Karmann Ghia. Porsche wanted an entry-level car. Let's join the VW. And so they did. And so they did. And so they did. And so they developed it. Porsche gets the more powerful one, the 914-6, the six-cylinder. And Volkswagen wanted to get the four-cylinder. But the decision was made, like you said. The new VW CEO, he actually gets a pretty good deal out of this. So he deepens the relationship with Ferdinand. He gives the car fully to Porsche. But in exchange, VW takes over all of Porsche's distribution in America. Huge, huge deal. Huge deal for VW. So we're starting to intertwine these companies just a little bit here. That deal is an enormously wide-ranging partnership, because you're trading distribution from one side of your business with the ability to create a product on your other side. I mean, it's basically merging the companies, because it's so massively intertwined now in this partnership, where it's not like, oh yeah, we partner with them on this one small little thing. It's like, no, our car that we expect to sell more of than any other car is made by the same company. It's like, no, our car that we expect to sell more of than any other car is made by this other company. Meanwhile, on the VW side of things, it's like, America, the most important and largest growing car market in the world, we now own the distribution for Porsche. Even if it's not structured this way, this is a merger. Well, if history were a straight line, what you were saying would come to pass. Unfortunately, it's not a straight line, or fortunately for drama on our show. So you're absolutely right. The 914 goes on to be a huge success. It sells one million cars. It sells way more units than the 911, which was the whole strategy. Porsche's cool with this. they're like great we're making our profits on the more expensive 911 we've segmented out our market the 914 is the entry-level Porsche sells a hundred thousand units in the eight years that it's on the market and I think it really shows Doug you can comment on this there is also a market for mid-engine roadsters I mean including the one sitting behind us regardless of price like these are pretty amazing sports cars yeah Porsche's previous to this had all been rear engines the 911 the the 356 and so this was a mid-engine which had was starting to really take hold in the car world as the right design because the engine in the middle is really the perfect balance you kind of can put the engine right in the center of the car and it gives you like perfect weight distribution when I always talk about sports cars in my mind like god-intended sports cars to be mid-engined that's how it's it's more difficult the engineering is more difficult than front engine but that's how it should and rear engine is just insane but Porsche made it work they've always been great at that but mid-engine is how it should be and when you say mid this basically means that it's still obviously behind where the passengers sit but in front of the rear axle in this case now there are technical mid-engine cars where the engine's in the front but behind the front axle but most people when referring to a mid-engine car are talking about a car that has the engine between the passenger compartment and the rear axle yeah I think you have a video where you say the Cayman GT4 RS which is the Cayman and the Boxster the same it's the same lineage we're talking about here is the best modern Porsche yeah I feel that way but it's controversial because the 911 is the Porsche don't hate us in the comments yeah I don't know Doug I feel like I've seen multiple the best on your channel every car is the best when it comes out and then it's superseded by the next best there you go you uh one of the differences between YouTube and um podcast world is uh titles and SEO is really important in the YouTube world right very and I don't even take advantage of it as much as some of my my colleagues yeah wow it's a while we're on this topic here of um engines I gotta imagine this is one of just the huge sea changes that is coming with electrification of performance cars right like uh yeah a whole different set of calculus like it doesn't matter there's no engine anymore although you still even in electric cars for a performance electric car you still want the weight to be as close to the middle of the car as possible for a similar reason honestly but the engine component and all that other stuff boxer yeah yeah it doesn't matter it's gone it's gone it's gone it's gone it's gone it's gone okay so a minute ago Ben you said like oh this naturally would lead to a merging of you know VW and Porsche and I was like well so this is in the late 60s when the 914 launches as we head into the 70s the oil crisis happens in the 70s and sports cars become less of a thing people are really worried about this this is like a challenge to Porsche it's particularly a real challenge to the car industry and it's a challenge to the car industry and it's a challenge to the 914 interestingly 911 sales stay relatively robust throughout the 70s because it's a luxury good right like just like in any recession and and even like sector targeted ones like the oil crisis and the auto industry for true luxury goods like those people like the market for that is very resilient the 914 though very different story so as we head into the mid 70s uh even though it was a very successful car and project for Porsche as a whole it was a very successful car and project for Porsche as a whole it was a very successful car and project for Porsche as a whole it starts becoming a real money loser so this creates a lot of tension in the company this is kind of a backdrop of stress to another family dynamic that's emerging which is you've got these two Ferdinand grandsons that are kind of vying starting to vie for control of the company you know they're now gosh I don't know probably in their 30s maybe entering their 40s fairies getting older here like who's gonna take over the company we've got succession vibes here like who's gonna take over the company we've got succession vibes here on the one side you've got Bootsy Ferdinand Porsche he's got the name he's fairies son and he's a great designer I mean he designed the 911 maybe the most iconic car design ever and this is German Ferdinand German working actually producing the cars but the other Ferdinand the son of Louise and Anton was hired by the German yes he's so yeah he's hopped over he's you know in the one he kind of like this dark horse kid right he's the Austrian side of the family you know you've got the car dealership business but he's also proved himself as like yep an incredible engineer executive he was in charge of this 914 project he managed it with Volkswagen that was an incredibly successful car until the oil crisis etc etc so he's like yo this should be my company tensions of course start to rise and something pretty incredible happens you know we've come across on the show there are lots of stories out there of family businesses and succession and how all this happens I don't think there's another case of anything going down like this that I've ever heard of so in the fall of 1970 fairy and Louise together call a joint family summit they're like we're gonna settle things and I don't know I'm speculating here but I suspect fairy and Louise were didn't have a lot of acrimony over I mean their brother and sister and they had Louise had her company fairy had his company they're both making a lot of money they're both making a lot of money everybody's happy this is between the children here so they call a family summit at the end of it they come to a very very surprising decision they don't decide that one Ferdinand or the other is going to take over instead they make the call that the families are going to completely and jointly exit operating the business everybody out of the pool not the two Ferdinand's got fairy fairy himself who's running the Ferdinand's long den at this point that the original Ferdinand they're going to continue owning the company but they will no longer manage the company they will no longer operate the company they will no longer design cars they will no longer make product decisions frankly this is just insane I mean because it's not like be one thing if they were like oh you know we're really not that good at this like we should hire professional man these are led the generational talents in the car industry and the best solution they can come up with is you know what we're all done here this is crazy I would be so fascinated to get video footage of what actually went down in that room and the logic that they could walk themselves through to this is actually the best outcome there's some direct quotes from a lot of them in excellence was expected and like as you can imagine it's a very delicate topic and they're also German so like they're very you know prim and proper but I think very he basically admits he's like yeah there probably was a better solution to this but like it did mean that we could kind of reunite as a family and like I think he said something like there were still tensions but we could go to each other's birthdays again you know something like that so I mean I guess in that you know if you value family above all else crazy is a rational is still it's crazy crazy decision because like you said they were they were killing it they were the best family business until this point and it had been a very successful one because of the efforts of the family and especially you got for an NPS now looking back on this we know what happens to for an NPS which we'll get to but you've got him on this up and coming track where he's so legit and it must have been so it's like no you're out crazy I mean he definitely was so pissed so let's talk about what happens here Bootsy he goes off and he founds Porsche design so there exists these weird there's like Porsche sunglasses out there you can buy Porsche designed laptops like all this stuff that's him that's a totally new company that he started it has now been reabsorbed into the broader Porsche conglomerate but that was started right he was like all right great I want to be a designer that's the path that he goes down the same thing happened in the Gucci family for anyone who's seen the the Gucci movie with Adam driver and there's sort of a family member who wanders off and does some like effectively like brand licensing he's like I'm gonna take the family name and make some money off it which is obviously what happens I think he also was very talented I mean designed to God in the 911 for God's right like he's talented but but yes trading on the name here the other Ferdinand PS this guy oh my god he is a he's a G so at first he's like I imagine inspired by his grandfather he's like I'm gonna go start my own engineering consulting company and consult for other car companies he does do that for a little bit but pretty quickly thereafter remember VW and the new CEO really wanted to build this relationship with Porsche with yes he gets recruited to come in and take over Audi for VW I don't think you originally I think he enters working within Audi but then very quickly becomes the head of the Audi brand for Volkswagen and Doug at this point in history what does the Volkswagen group own brand wise yeah that's interesting question the brands that we know I think it was just Volkswagen and Audi Audi had been a separate company Audi had been a separate company and it's also important contextually here to to to make one really important point about PS and Audi at that time Audi was a joke Audi was not what it is now like now you view Audi as a legitimate competitor Mercedes and BMW back then it was more like how sob would have been treated like it was a absolute second or third tier brand that no one could possibly you know it was not it was not a brand that was desirable at that would be like today infinity like I know you you owned a kia right it's a bit like you know kia and Hyundai are trying to enter the luxury market and people are like, really? Yeah, it was on that level of like, I'm going to stick with Mercedes. Was the Audi 5000 the thing that kind of saved them and brought them back? On the contrary, actually. That car was the one that had the famous scandal in the United States where the 60 Minutes found that it unintended acceleration where it would accelerate, which turned out to kind of be unfounded, but their reputation was like severely, severely damaged by that. But that was this era. That was this era. Audi needed to turn around. Volkswagen's got Audi. They're like, we don't know what the hell to do with this thing. We got BMW and Mercedes. They're killing it. So, Pietsch comes in and like, I mean, this dude is good. Like, this was such a mistake to force him out of Porsche. So, he turns around Audi and like builds Audi into, Doug, like you said, the Audi we know today. And he's so successful that in 1993, he gets promoted and becomes CEO of Volkswagen. So, you get this situation where they kicked him out of running the company. And then he goes and ends up running the company. It's wild. Wild. I mean, he oversaw and launched the new Beetle. Like, literally his grandfather's legacy, the Beetle. He turned over the Beetle model to the new Beetle. How long was Ferdinand Pietsch running Volkswagen? A long time. 1993. I believe he was chairman until 2015, 2016, maybe. Whoa. A long time. He develops this reputation of being this just iron-fisted. Like, I can only, when you say, I can only imagine. I can only imagine how upset he was when they made the decision to end the family involvement. He has this rep of being, like, incredibly angry and everything must be to his standard. And so, I can only imagine how angry he was. He also, he had 13 children, but I think four different women. He had a lot of kids. He was that typical, you know, how you think of, like, a German industrialist. Around this time, Volkswagen started really gaining a lot of brands. So, in the late 90s, they bought Lamborghini. They owned two Europe-only brands. One for, like, Spain and one for, like, Eastern Europe. And they repurchased the Bugatti, the rights to the Bugatti name, which had gone to an Italian company. And they brought it back to France, where it was, like, initially existing. Yeah, restarted. I mean, Doug, you kind of said, but to put a bow on it, of what a baller Pietsch was. In 1999, the Global Automotive Elections Foundation, they award him the Car Executive of the Center. And, by the way, that's, like, uncontested. In the car world, for Nan Pietsch, it's looked at as, like, exactly what you're saying. The guy. Everybody knows his impact. Everybody knows how effective he was. And the families, Porsche is just like, yeah, now you got to get out of here. Unbelievable. Maybe he wouldn't have had the motivation to do it. Who knows? Who knows? Just wild. But Volkswagen, much bigger company than Porsche, right? Yeah. Like, he got kicked out of his own company, so he went and ran a much bigger one that competes with it. And then he. And then he. Grew even bigger. Yeah. Yeah. Yeah, yeah. Yeah. Wow. So, back to the Porsche side. This decision was just really not good. Really not good. So, the first CEO who comes in, the first professional manager CEO, actually is somebody who has been with the company for a long time. Ernst Furman becomes the first non-family member CEO of Porsche. He was actually part of the original elite engineering crew back in the sawmill. So, he has a long history with the company. Unfortunately, he was probably a better engineer than a manager, though. His first move is to scrap the 914 and instead introduce the 924. The 924 was another joint project between VW and Porsche. The problem with the 924, I think it actually was a decent car. Doug, you actually reviewed a 944 recently, which is the kind of next iteration of it. I think you can say, I think it was a good car. But. It's not a Porsche. It's a front-engined, water-cooled, like. It suffered from that stigma, for sure. The saving grace was it was actually a pretty good car to drive. And so, over the years, and even at the time, it was kind of accepted as, hey, we all get that it came from a Volkswagen, but sort of the beloved 914. And it drives pretty well. So, like, people were like, yeah, we'll take this as the entry Porsche of the time. But it wasn't a 911. It wasn't a 911. And it wasn't a 914, either. No. It was a totally different thing. And the 914 was a small, lightweight, compact, roadster, removable top. The 924 was definitely a different kind of situation. So, Furman had a quote on it when asked about, like, what is this? He says, the 924 is aimed at new clients who either can't afford a 911 or are not necessarily looking for the performance of a 911. Oof. I mean, I guess that's true, right? And that's also true of the 914. But, like. Can you come up with. It's not the right way you want to position your brand. But it's the quiet part loud. Yeah. Jeez. Can you come up with something that is not using the word not to describe who wants it? Like, how about you say who would want it? Yeah. This is for the poor customers. Right. Right. Right. And again, but also, it's just, like, in the whole philosophy of it, it's not a Porsche. Even more concerning is the 928. So, Furman makes a decision. As the new CEO. As the new CEO of the company, that it's time to replace the 911. And, again, you know, maybe, like, let's give him some credit. This is the 70s. The oil crisis is going on. Like, there's safety regulations. This is post-Ralph Nader and unsafe at any speeds. Like, it's maybe reasonable to think that a rear-engine sports car isn't, like, a great strategy to be pursuing here. And unsafe at any speeds, that was, like, a federal report that came out that said. Like, basically, all cars on the market are unbelievably unsafe, and people, our citizens, should not be driving around in them, and so all cars need to change. And regulations started to really show up, like, in this time period. In the car world, the 60s are kind of viewed as, like, the last bastion of just, like, anything goes. And some very special cars came out of that era. And the 70s, everything started to get. The oil crisis was a big factor because that started to screw with emissions. And then you had all these regulations about bumpers and safety and seatbelts that, you know. Were very important and beneficial, but at the time, it was like, oh, they're killing our fun. It is astonishing how much safer cars have gotten. Astonishing. I mean, you look at these, like, cute old Porsches that are so much smaller. Right. And you look at the big ones today, and you can lament, oh, cars have gotten so big. But cars have also gotten so much safer. Far. And they're faster than they were back then. So it's kind of the best of all worlds. And in most cases, they're more efficient also. Totally. So in 1978, Furman introduces the Porsche 928. With the stated intention that this is going to eventually replace the 911. They keep selling the 911. He says, we'll keep selling the 911 as long as we get demand for. I think it was at least, like, 10,000 units a year or something like that. But, you know, once the 928's on the market and demand dips for the 911, we'll stop making them. Now, I want to defend the 928 a little bit here. Because it was a. This is an important moment in Porsche's history. When we look back on it now, it seems insane that the 911 would go away. Like, how could that be? But it's important to keep in mind that, like, the 356 went away. And that was the Porsche. Like, how now you say, like, oh, I have a Jeep and you're referring to the Wrangler. Like, that was. The Porsche was the 356. And so that went away for the 911. It only made sense at some point the 911 would also go away. The crazy thing about the 928 in the Porsche world is that it was a front-engine V8 car. Which Porsche had never pursued before. And was more kind of an American thing. But in the context of the time, it's not that insane that they went after this. All sports cars were starting to get bigger and more powerful. And because of the oil crisis and because of tightening emissions laws, it was getting very difficult to make any sort of power from anything other than a big engine. And even big engine cars at that time didn't really make a lot of power. Cadillac had, like, 8-liter V8s that made, like, 150 horsepower. I mean, it was embarrassing stuff. Because they had to put so many emissions controls on that by the time you actually got the power out, it was a disaster. So it didn't seem that insane. And the Jaguar E-Type had just been replaced. That was the big competitor. It was another. That had been replaced by the XJS, which was now a V8, comfortable, automatic transmission car. Mercedes-Benz did the same thing with the SL class. It went from, like, a little fun sports car like the 911 to a big V8, kind of relaxed, leather, luxury cruiser, that sort of thing. And so it made sense that Porsche would maybe want to head in that direction also and start thinking about moving past the 911 just as they had moved past the 356, you know, 20 years before. There was some sense to it. So the 928 comes out in 1978. And as we reach the end of the 70s and into the 80s, as we also have talked about a lot on this show, everything that the 70s was in terms of austerity, oil crisis, 17% interest rates and massive inflation, the 80s was not that, shall we say. Not that. It was a rising tide that lifts all boats. Lots of disposable income. Wall Street is ripping. A lot of pinstripes. Yeah, it seems like actually a really good time for fast cars. Seems like a good time for fast cars. And indeed, it was, including for the 928 and the 924, succeeded by the 944. And still, the 911 people still wanted them. I think largely because of that, although I'm sure there were other reasons, too. So the Porsche and Piaccia families, when they exit operationally from the business, they still own the business. Right. they're still like the supervisory board. - They get fed up, with Furman they oust him and they bring on a new CEO an American as CEO of Porsche one Peter Schutz famously he comes in and he redraws the 911 production line and Doug I know you have some first-hand experience of the legendary great the great one of the great stories in the auto industry the 928 though I just provided an impassioned defense for it it never felt like the right car to Porsche it never felt like the right car to especially the employees who had kind of fallen in love with this 911 it had been in production now at this point for probably 20 years 25 years maybe and the 911 was Porsche to a lot of these people and the fact that it was going to get replaced by the 928 was this sad thing and it had kind of really hurt morale in the industry and I think that's what's going to happen in the future. at the factory all the way up to the to some of the people at the top and so the great story is that uh you know the 911 everybody knows the impending cancellation is coming it's still going but it's coming this beloved car and so uh Schutz Peter Schutz the American CEO is sitting in the uh the the office of Helmuth Bott who's the chief of engineering for Porsche and there's a line on the wall that shows where all the products stop and start and you know timeline and you know this is like a like on a whiteboard yeah like on a whiteboard or something to the wall right and so they're sitting there talking about it they know that morale is low they know that the company wants to keep the 911 even though it you know it should be replaced because it's old you know that's the thinking of the of the people and that's what was said like there's a thing in German culture where like when something has been decided it's been decided an edict has been given and the car's out I mean the 928 is on sale like it has shown up to replace the 911 in the spirit of these other cars of the time v8 front engine it made sense it was what they were going to do but the morale was low and they knew this and so Schutz stands up he's got a marker in his hand he stands up he walks up to the timeline on the on the wall and he draws a line on the timeline all the way onto the wall and extends the 911's timeline you know indefinitely including onto the literal wall now this story of course is this is like the stuff of legend in Porsche like Peter Schutz the American CEO saved the 911 and he's like oh my god I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna do this I'm gonna the 911 in this moment and a lot of talk about whether this actually happened like did he actually just draw the line and make the complete 180 and this would be a good story to invent if you needed a morale boosting right especially if you're trying to you're trying to like boost the uh the reputation of the CEO among the among the workers he drew the line right and there's a perfect line which is Schutz just looks over at the chief of engineering and goes do we understand each other right and then he walks out I always wondered if the chief of engineering was going to do something like that or if this story was true I worked at Porsche uh 10 years ago and um had become friends with Porsche's general counsel in North America when Peter Schutz retired he moved to Naples Florida and the general counsel at Porsche and Peter Schutz were neighbors in their homes in Naples and I one day he went over to his house and asked him you know is the story real did it happen and apparently Schutz said not only did it happen but Helmut Bott was grinning like the Cheshire cat when I drew that line like it was like this moment like we're gonna do this and it like really apparently really in in his words it really actually was a true story wow so great that's awesome to get that validation because there's so many of these stories that we tell on the show we're like we're like this is probably apocryphal and there's really no way to verify it now of course if you're Schutz you'd want to tell the story because it's become so famous but you know from his mouth at least the story is real it's a great story yeah like I mean literally he extended the line right of the production line right onto the wall right so do they keep making both cars yeah so they kept making I think they made the 928 until 1995 it was a Vita King who comes in in a minute who uh finally kills the damn thing the problem with this decision you'll get into more economic realities of this situation as the 80s kind of draw to a close whatever but the problem with this decision was the company was planning on ending the 9-11 and so by drawing that line symbolic though it was we're going to keep doing this it also committed a lot of the company's resources to now refreshing something that they hadn't planned on refreshing yeah so in the go-go years of the early through mid-80s no problem right more let's we'll do a we'll do an ICO we'll issue some NFTs 2021 yeah exactly in fact I think Schutz was like let's make airplane engines yes yeah I think he was yes oh my gosh and on the back of you know these go-go years and success they're selling the lot of 944s like they sold a ton of those things the families take the company public so just like a lot of these like we talked about on the LVMH episode a lot of these European luxury brands craftsman brands uh they did an IPO they thought they were being smart they sold I think a 30% stake in the company but all non-voting shares like oh we're not gonna no you know no corporate raiders here nobody will have any voting control except the families like it is impossible that somebody could you know attack us because the families all you know it would have to be somebody inside the families who would attack us why would that ever happen well everything goes great the stock you know doubles within the first year that it's on the market but then 1987 long-term capital management blows out you know the end of the go-go years the 80s not good not good for Porsche and not good in a lot of senses like ages period economic climate anybody be you're making luxury sports cars now as we talked about in the 70s the oil crisis in the 70s was really was bad for Porsche it was really bad for the 914 the 911 was pretty robust like it was very resilient I think the same is again true here at the end of the 80s but they've still got the 928 and the 944 on the market and like those things started sucking wind big time it's not a good situation because now you have three aged products and so the economy is slowing and your cars are not really competitive yes so shoots though he continues production of all three lines and not only does he continue production he reinvests especially in the 924 944 line they even refreshed it a third time to the 968 I mean same basic car yeah like they're investing resources in this car and then at the you probably have a better sense than me but like another aspect of the kind of recession at the end of the 80s was the exchange rates with European currencies got hit really hard right and so relative to the Asian currencies in the US so it became I don't know call it ten twenty thousand dollars cheaper to buy an equivalent entry-level sports car from a Japanese manufacturer and it just so happened that at this time you know Japan was kind of having an economic boom and as a result of that they started making these sports cars the exact sports cars you're describing so the Nissan 300 ZX yes to show up the Toyota Supra you know all these cars are showing up and by the way they don't have four-cylinder engines and they're not 25 20 year old platforms like the 968 was and there was very little reason to buy a 968 I mean is I feel like I'm sort of in my history probably all of us barely you know starting to enter consciousness here you know this is pre fast and the furious but not that pre fast and the furious all those you know Japanese cars that yeah you know that got tuned up the Supra's especially yeah this is that we're all starting just starting to come in then and starting to blow up and they offered just as they do today this great great value proposition of like big power for not as much money yeah and again the 911 isn't threatened by this right but the 944 968 hell yeah is threatened by right it's like nobody's buying those and the 928 by then was so old that sales was a lot better than the 998 which was the night the entry level which was the 944 that became the 968 then there was the 911 which was actually the 964 911 by that point only make things even more confusing and then there was the 928 which was the front engine v8 like flagship car that nobody wanted that nobody wanted so they literally only made three cars and they were all three number nine cars it was a complete disaster I mean Porsche's never named cars well even now but like yeah at the time you had again you had to like speak the language you had to like and by the way the 911s all said Carrera on the back so everybody's like what the hell's the 911 you know is this a 911 why does it say Carrera never made any sense and all Carreras are 911s but all 911s are not Carreras today that has changed over the years then there was a trim level of the 924 called the Carrera it was actually called the Carrera GT which they later named this car right none of it it was all confusing no you had to be like a German who was into this stuff to like figure out the precision level with which it made sense huh so as all this happens Porsche is now a public company the stock price starts to decline precipitously and they floated 30% of it they floated 30% now no voting control but the company they're really like cresting the treetops here as they're you know beginning their descent at one point Porsche's market cap was less than 400 million euros so they're really like cresting the treetops here as they're you know beginning their descent at one point Porsche's market cap was less than 400 million euros crazy to imagine like almost zero and I believe also at that time they didn't have any debt so like truly like the markets believed that Porsche's market cap was less than 400 million euros was worth nothing. It wasn't like, oh, there's value here, but there's a big debt burden on the company. It was an unbelievably difficult time. And it's kind of funny to think about because now people think of Porsche as Porsche, like this crazy company. It's one of the hottest brands, like you said, probably one of the most valuable brands. And it's only 30 years later. Only 30 years later. It was dire straits. I pulled up the US sales figures for Porsche from this era, which is so insane to me. They dipped in 91, 92 to 4,100 units. That was worse than 1965 sales. They had routinely sold between 13 and 30,000 cars a year throughout the 60s, 70s, 80s, 13 and 30,000. And in the US at 92, they dipped to 4,100 cars. That was the level that we were talking about. It was complete dire straits. So even though the public doesn't have any voting control, everybody starts to think the only thing that can happen here is this company is going to get bought out. One equity research analyst actually in a research, said that he thought there was a 98% chance that the families would have to sell and that they would accept some amount of value for their stake rather than just have it go to zero. So Schutz gets fired, but it's not like that fixes anything. I think it was 1987 when he gets fired. Over the next six years, they cycle through, I think, four, three or four more CEOs, none of which really figure it out. There is one bright spot though, however, which if this were a normal Acquired episode, we would just skip, but we've got Doug. The 959 comes out at this point. It's actually the 959 and another interesting component offshooting that, but the 959 comes out at that time, which is like their first supercar. So sort of the predecessor to this car. And it actually wasn't commercially successful, sort of in keeping with Porsche's world at the time, but it was kind of a test bed for some new technology, including four-wheel drive in a supercar, which has now pretty much become standard fare. The 959 was really the first car that had that. After the 959, Porsche was so desperate though, that they started taking on projects for other manufacturers. And so it's known in the car world, but not as much in the general world. Porsche built a Mercedes-Benz, which was called the 500E. It was a midsize sedan. Mercedes didn't have the capacity or didn't really want to do it. So they built a sedan for Mercedes. That's in the Porsche factory in Zuffenhausen, in Stuttgart. Like who designed it? It was a Mercedes car. So it was a Mercedes E-Class, like a regular Mercedes sedan, but with a larger engine. And Mercedes felt that having Porsche involved would give it some sports car credibility. Porsche literally produced the car. And then Audi did the exact same thing. Audi needed more credibility because they were still kind of a fledgling luxury car brand. They wanted to get into the sports realm because that's where a lot of money was being made. And so Audi came to Porsche and said, can you help us develop a car? And it was called the RS2. And I actually had one and just sold it last year. It was a station wagon. And that was the conditions under which Porsche agreed to build the car. They said, we'll do it, but we don't want to compete with our cars as a coupe, you know, a sports car. So if you build a station wagon, which essentially touched off the like high performance station wagon thing, which Audi is still known for to this day, more than almost any other thing. But Porsche was so desperate. They even allowed Audi to license their name and put it on those cars. So the RS2 had Porsche brakes that branded Porsche. The Porsche logo appears in the badge, like the literal emblem on the side of the car. Porsche was just like, yeah, fine, because it literally kept the lights on in Stuttgart. It's Zuffenhausen. So when you say- They're just mortgaging the brand. They were desperate. They were completely desperate. So when you mentioned like the Porsche-Mercedes-Benz relationship, that 500E was an interesting thing because around Porsche at the time, there were a lot of ways that it could have gone totally wrong. And I went there and I did a factory tour a couple of years ago. And the guy who gave the tour had worked there for like 25, 30 years through this time period. And he said that in his mind and in the mind of a lot of Porsche employees at the time, Mercedes-Benz helped save Porsche. Mercedes could have built that car, but their brothers in Stuttgart down the street were having really tough times. Here's a project that you can work on to keep the factory workers going. Wow. And it was literally like, you have empty production lines. So even though you're not going to make a lot of margin on this, let's at least like- You can be our contract manufacturer. Yeah. Like when you have union contracts, maybe this was part of the circumstance. You have union contracts, you get to pay these people, whatever. You're not going to make money, but we're doing it. Wow. And it's something. It's a project for you. We'll keep your lines going. Instead of losing money on having to pay the, well, yeah. Right. Wow. It was a tough era. It was like indescribably tough. And I think this is lost on a lot of younger people who have only seen Porsche in the world of crazy expensive cars and all the money they charge for colors now and all that. There was a period where it almost all came to zero. And not that long ago. Not that long ago. That's what's crazy. It wasn't like this was in the fifties. Like we were alive. This was real stuff. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is- No longer the hard part. Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks are real. Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower. Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place. And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approval, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security. ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work, safely, securely, at scale, go check out servicenow.com slash acquired and tell them that Ben and David sent you. So David, this thing that Doug just referenced to me, the money they charge for colors, you can do a thing today where you go to buy a Porsche and their online configurator, and they have the paint from every single Porsche ever produced in history. And so you're like, you know, there was really something about this particular 911 in this year. I really loved this paint. You can pay them something like $15,000. $15,000 for your Porsche to be in that particular color. It's like a library wine. Yes, that's exactly it. Imagine the Porsche of the 80s, early 90s, like commanding that kind of, it would never have happened. But now the brand has changed so much that like $15,000 for a color, people are like falling all over themselves to do it. Yeah, why not? The other thing that it's emblematic of, which I think we haven't really talked about yet, of what makes Porsche special, is this unbelievable heritage. Like the design language that they use. What the 911 is. You mentioned it earlier, they don't really change it that much from, you know, generation to generation. There's this sort of obsession with put something out there and then spend years and years and years, tiny little tweaks and refinements, making it the like platonic form of what it can be. And there's this like obsession with if you loved Porsche in any given year, we want to make sure that we keep you along for the ride and you can continue to love us today. Right. If you as a child, wanted a 911, guess what? It's still around. It still looks about the same. And it's still the same level of desirability that you wanted back then. It's so funny. I feel like the sales cycle for a 911 has got to be 40 or 50 years, right? Like kids fall in love. And then you can't really buy one until you're in your 40s or 50s. It was always a weird aspect of the brand that like you actually weren't necessarily only marketing to like adults. You also had to market to like people who would cultivate this passion that you knew. That would become a thing later when you weren't even in an executive or you weren't even working there. But like that's part of the brand is like hooking people young and making them feel like this is a cool thing. So Doug, this thing that we're talking about, this idea that if you loved Porsche ever, we want to deliver on that promise today. Do you feel like that consistency has been there since the very beginning? Or do you feel like that's something they learned in their like rise from the ashes after this 80s period? That's a good question. But you have to assume they didn't expect in 1948 that they would ever even be in the position to deliver that, right? In 1950s. Also, like you said, I haven't quite thought about, but I was planning to tell this story of like, oh my God, Furman wanted to kill the 9-11. What a dumb idea. It was like natural. They killed the 356. The natural thing would have been to kill the 9-11. Looking back on it, it's insane. But at that time, it seemed like, you know, now all these icons have emerged and all this lore has emerged over the years. But when you really think about, you put yourself in the perspective of those eras. Okay. So. Yeah. So, Portia's in this tailspin. The two eras that happen next are both equally amazing. So, in 1993, a guy named Vendelin Veedaking gets appointed as the CEO. Now, he had actually started his career with Portia in the 80s as all this crazy stuff is happening. He was like a loud voice of protest against all the, you know, shoots and Furman era decisions. He, you know, he resigned and left the company. They recruit him back in the early 90s to take over as head of production and he implements the toyota production system at porsche which uh they must have been like the last auto manufacturer in the world i don't know ferrari uses the toyota production system but like this wasn't um new technology at this point in time right remember porsche is bleeding cash being more efficient and more profitable in your operations for whatever cars you can sell is pretty important he's like the like the tim cook of porsche here he gets promoted to CEO. And when he does, speaking of Apple, he kind of pulls a Steve Jobs return like moment. He cuts the product lines down to just the 9-11. So this is the right thing that needed to be done. But it's also kind of crazy. He kills the 944, 968. He kills the 928. He takes everything back down to just the 9-11. And analysts, people, car magazines ask him, what's your strategy for an entry-level Porsche? And he says, Porsche's strategy for an entry-level Porsche is a used Porsche. Such a good line. Such a good line. Such a good line. So by the 95-96 production year, the 9-11 is the only Porsche model left on the market, which hasn't been the case since the 356. This is kind of crazy. So what kind of company makes one product? Right. Like, I mean, seriously, what are, like, do they believe that this is a transitionary period? Or do they believe, like, this is the long-term strategy? No, it's not like Weedy King was like, I am a cost cutter, and I will cost everything down. Like, he is much, like, he has big ambitions. Big, big, big ambitions. This is a transitionary moment. He does want to expand the Porsche model line. As we shall see, he greatly expands it. So I think this is pretty brilliant. And certainly for the financial performance of the company was brilliant and its survival. I think 9-11 enthusiasts are less enthusiastic about this. But he decides that rather than the old strategy for the entry-level model of sharing a platform with Volkswagen, what if we have the new entry-level model instead share a platform with the 9-11? And so what he does is he says, let's take the front end of the 9-11, of the next generation 9-11, the 996, and use that exact same front end, same headlights, same hood, same everything, and then made it with a new entry-level, you know, back end, the rest of the chassis of the car, revive the old 914 concept that was so successful, mid-engine roadster model with a, how would you describe the, it's not a convertible. Yeah, no, it is. It is. The monster was a full convertible. Yeah, yeah, yeah. Yeah. And it's also important to point out the interiors were almost entirely shared as well. Ah, the interiors were, yeah, like the steering wheel and like. The wheel, all the buttons. In fact, if you get into a Boxster, which was a two-seater car, it has a coat hook on the back of the seat because the 9-11 had a coat hook on the back of it. You can't put a coat in a Boxster. The seat is right up against the. But they shared everything. Ah, interesting. So, Doug, what you're alluding to, this is the Porsche Boxster, which becomes a huge success. And I think the reason for it is. Is that it genuinely is, to anybody looking at it, like, this is a Porsche. Yeah. Not that stupid quote that Furman had of like, this is for people who don't want a 9-11 and don't care about performance. This is like, no, no, this is a freaking Porsche. It shared the design language. And I think Wittekind's thought was, the entry-level Porsche has always been looked at as a second-class citizen, like Furman literally said, which was true. I mean, everybody thought it, but he said it. How do we make it not look like a second-class citizen? And the answer is, make it look like a 9-11. And make it literally, literally share. I mean, it didn't even just look like. It literally had the same fenders, the same, you know, headlights and hood. And also from a production and profitability and operation standpoint, this is so great. You're now sharing so many components, not with another auto manufacturer, but with yourself. Right. So, Doug, what's the difference then at this point in time between the 9-11 and the new Boxster? The thinking was that they would continue to move the 9-11 upmarket, more expensive, more power. So, the Boxster comes out in 97, for the 97 model year, and it was a huge, huge deal. I mean, it was on the cover of every car magazine. The whole Porsche has a new car. This is incredible. It had 200 horsepower. And the 9-11 of that era had about 300. So, it was a significant difference. Plus, the 9-11 was just more of a, it was bigger, it was wider, it was faster, you know, it was a more, it was more of a muscle car. Is it fair to say that then, and I think maybe even especially now with the Boxster and the Cayman, the Cayman is the hard top model of the, of the Boxster. It's also a different, kind of, experience philosophy. And it has, over time, it has evolved even more significantly from 97. Now, the 9-11 is kind of playing more of a luxury car, like touring car role almost, where, you know, with the special colors and the stitching and all that. And it seems like the more Porsche has focused more of its sort of true sports car efforts on those, the mid-engine cars, as they call them, the Boxster and the Cayman. Yes, it's the entry-level Porsche, for sure. But it's also, it's not like you feel, like, crappy if you're buying one. You're like, oh, you know, I'm buying the best version on the market of this particular product. And it was mid-engine again. So you, you know, arguably it was the correct place for it. It felt like a true Porsche sports car. For the first time, Porsche's, you know, entry-level car felt like that in decades. Yeah. So, Vita King has this awesome quote about the strategy for this. We didn't want to flee from the competition into higher prices, meaning, like, not be in the entry-level market at all. He says, we don't want to be Germany's Ferrari. We don't want to be a that's shrinking, but rather a growing fish with more room to move in a larger lake. I feel like Vita King and Don Valentine of Sequoia Capital would be, like, brothers in arms here. Like, they're targeting big markets. That is the strategy. But they're targeting them in a Porsche way. So Vita King, like, I don't know how much this was his thinking all along or that he was just emboldened by the success of the Boxster. He really means it. He gets into SUVs. And this, even as, like, a teenager at the time, not being that much of a car guy, I just remember people going, like, Porsche's making an SUV. Have these people lost their freaking minds? Like, who on earth would buy a Porsche SUV? Also, I got to say, like, maybe all cars were kind of ugly in this period. But I remember when I looked at the first Cayenne, I was like, so it's like a Toyota? It wasn't the most attractive car. There's no question about that. Everybody hated the design language. And you know what? It's been 20 years. It has not grown on me. Yeah, the Macan looks really good. The new Cayennes look great, too, honestly, ever since they redesigned in 2011. But those early Cayennes, you see them now and you're like, still ugly. It also just doesn't look like a Porsche to me. Like, there's not enough that's brought through from the heritage of the, how do you describe the back on a 911? Right. That's sort of like sloping. What happened was the Cayenne was an interesting situation because Porsche was kind of a first mover. They weren't exactly. Mercedes came out with an SUV first in 1998 model year called the M-Class, which was a. That was a revolution. And they built it in America, which was a really big revolution. BMW came out with the X5 in 2000. And that was also a revolution. The M-Class, Mercedes never had the sporty pretense that BMW did. So that car was just for suburban families. The BMW X5 actually had to be sporty. And it was like, oh, so not only can luxury brands build SUVs, but they're sporty. So Porsche comes out in 03. I mean, they beat Audi. Audi didn't come out in an SUV until 07. Porsche was there, like early, early, early. So, but the problem was Porsche had no clue. Because they were early, they had no clue what to do. And so I remember at Porsche, when I worked there talking to some of these people about the early Cayennes, Porsche literally didn't know what to offer in an SUV to the point where they actually legitimately asked some of their American employees, do we need to offer gun racks as an option for the American market? They just didn't know. They literally, they were only building sports cars and they just, they had no concept, no concept of like what people would want and what the early Cayennes had an optional spare tire on the back, like Jeep Wranglers do. You couldn't get that. Part of this was a cultural, you know, German thing for sure, but like not understanding America, but I don't think anybody understood. Like, I don't think there were any super expensive SUVs on the market. The only ones were Land Rover, but they were focused so far on off-roading. But part of the reason the Cayenne was ugly when it first came out is because Porsche decided, we're Porsche, we're going to do it best. And so they come out with an SUV that is both amazing on-road and off-road. And the early Cayennes actually have an unbelievable off-road capability. They have a two-speed, transfer case. They can go high-low gearing off-road. They have air suspension that can lift them up and lower them. They had all these off-road hardware that like you would never put in a luxury performance SUV now. But because Porsche didn't know what customers would want, they decided to give them everything. And so the result was it was a big, bulky, heavy car to carry all this hardware. And so it looked, it just wasn't, it didn't, it wasn't executed that well from a styling perspective, but from every other perspective, it was a hit. Yeah. I think a few things to say about it. There wasn't anything else, that was like a, I can spend a hundred thousand dollars on an SUV. Right. This was before the days of an Escalade even. Cayenne came out in '03, Escalade came out in '99. So it was, it was, the Escalade was a hit. But Escalades were like 40, 50 grand, right? And they were just, at that time, they were just Tahos that looked nice. Like now Escalade has become a real thing. But at that time it wasn't, Porsche was really pushing into some new territory. Like it was a crazy decision. And SUVs were becoming so important in America. I think there were just like a lot of wealthy people out there and a lot of status-focused people that were like, yeah, there's an SUV I can spend a hundred grand on. Like, hell yeah, take my money. And also there's a practicality of, I kind of need a minivan, but I don't want to drive a minivan. van and so i'm driving this new emerging class of suv but if i have money i kind of want the porsche version of that and porsche must have been thinking hey we've got all these customers who love our sports cars we have this brand name that's always been associated with performance how else can we hook these people they have families right and so and and by the way with those families they're buying an x5 and it's like why don't we right yeah and the danger here if you're at home and you didn't know how this ended and you were a smart business person you'd be thinking well this is going to borrow against their brand equity right like this is going to drain the bucket not add new love to the brand bucket and the magical incredible amazing thing about porsche is they have doubled down on this strategy it has become a huge part of their business they generate a ton of margin on the suvs and it has not borrowed against their brand equity it has increased the love for the brand because at the same time and just before they had given a huge shot in the arm back to the performance with the boxster and the 993 911 and then also done the suv which they partner with volkswagen with ferdinand piash uh it kind of makes peace uh between the two so piash is running volkswagen at the time comes out with the tuareg which was volkswagen's suv and that's that served as the basis for the original cayenne really yeah porsche starts a new whole new production facility in a new part of germany in leipzig to make it and then ultimately shortly thereafter makes this car the career gt at the same and you know production facility that's right they were built in the same place and you know i think that goes back to the point you just made that porsche the the suvs yes you'd think you come out with an suv it destroys your brand credibility we've seen this with maserati come out with all these sedans and now nobody wants one but porsche always made sure to be making other cool stuff and to keep coming out with other cool stuff reinvest in the performance like you said and so they used this new factory to make it and they're making it and they're making it and they're making it and they're that cayenne was built in to also create this supercar and that was important it really showed people hey they might be making an suv but they're also making this so they're legit for people who are just listening to the audio this is the career gt sitting behind us the career gt okay we've alluded to this amazing machine behind us like what is this thing the career gt in my mind is the greatest driving car ever built and a lot of people actually said it's not objective by any means but a lot of people who have driven you know this and a lot of other cars feel that way about this car it was a true analog supercar which means manual transmission there's very few driver aids in this car like you'd get in a modern car stability control traction control that sort of stuff is either non-existent or heavily dialed down full carbon fiber body like no expense was spared basically and the coolest part was that the powertrain which is a big v10 was shared with initially it was developed for formula one racing and then it was evolved to le mans racing and in that way they created a formula one engine it didn't work out it's a little bit like the original 911 engine that for an mps design for racing but then only made it into the right it's exactly like that the crazier thing here though being in that time you could do that because there were no emissions regulations the concept of taking a race car engine today and putting it into a road car is just non-existent like to get a le mans or formula one engine homologated for road use is just like mind-blowing so that's that's the cool thing and this car has um it originally came out you know in this era and and was thought of as cool and special and whatever but its legend has sort of grown since then as sports cars have moved away from some of the things that made this car so special specifically this analog feel you know all exotic cars now are automatics and hybrids and that sort of thing and this was kind of the end of the end my sense is this car too has a reputation partly because paul walker died in it yes like unlike a lot of porsches and the 911 like this is something that you need to be really really know what you're doing to operate this thing you can't like if you let it get away from you it'll kill you yeah it has a reputation for being difficult to drive which i think is somewhat unfounded but also especially by modern standards cars have gotten so much more powerful than this you know a new audi rs3 which is just an audi high performance audi sedan that you can buy for 65 70 000 faster than this car zero to 60 like it's not that crazy by modern standards but at the time it certainly was something yeah um but i guess like today cars like there's so much stuff technology in cars that is designed to keep you from like doing stupid stuff and that this car was kind of the end of that era and i think that's why it's so special it's like the last of these cars that really you could get into trouble and and paul walker died in one um and there were some other deaths too that weren't quite as high profile but there were some serious um accidents and some people died in them and and maybe still will you know i don't it's it's still out there and it's still a dangerous car the weirdest thing about high-end cars that have lore associated with them is typically when someone high profile dies in it the value goes up right it's like a like an artist it's like paintings yeah i think that car people had always known the car had kind of this reputation there weren't like lawsuits against porsche about porsche got sued yeah it went to jury trial porsche was found liable at least partially liable wow and and that's a big deal if you're an automaker because they got 1300 of these out there right because you find liable was um and this is the value of the car now like production was initially intended to be higher than it ended up being they stopped it early and so they had a they had some some weird issues happen there was a changing regulation that forced them to build a lot of them sooner than they thought so they ended up flooding dealerships with them earlier than they expected to and the car didn't sell well when it first came out the sticker price was 440 000 and they dropped fast you could get them in 080708 you could get them for 250 all day long and now you can't there's they don't exist under a million dollars it's a gts apple stock or career gt would be a lot more fun to own i don't need seven of them or whatever but it would have they all completely took off wow it's funny i thought that this you know was going to be a fun little digression about the career gt but i realize now actually this is a super important point to the business history while they were drawing on the brand equity to make the suv this was a big part of putting cash back in the bank of the brand equity yeah um and to do it on the same production line it also had that effect it also helped legitimize that facility because up until that point except for the ones built in austria all the portions had been built in stuttgart in zufenhausen in that factor that same factory for all these years and so this car helped legitimize like oh we might be making a factory in east germany where we're building suvs but we're not straying too far we're still doing our thing so this point is an interesting one because it is something that other luxury brands do as well i remember reading when louis vuitton first started coming out with the more approachable wallets and clutches and ways that you could tiptoe into participating in the brand story they were also releasing hundred thousand dollar two hundred thousand dollar special handbags that were new products or new collaborations with other designers that sort of told you no we're still louis vuitton we all we just have this other way to be a part of our brand right right and porsche would go on to do it again which i'm sure we'll talk about shortly oh yes so on the back of this like incredibly bold plan and turnaround and success by vita keg i mean he becomes a legend and porsche goes from death's door less than 400 million euro market cap when he takes over to by 2007 porsche's market cap is 32 billion euros crazy a better investment than a carrera gt in fact so they never had to have any like help once they scraped that bottom of whatever it was 400 million dollar market cap nope porsche is saved it will be independent forever families will never have to sell that equity research analyst can eat his words no not quite uh there's another chapter to the story so that's 100x market cap growth is that right did you say 300 million to 32 billion yes that is 100x market cap growth in a decade occasionally there are these hundred baggers available in the public markets and like you only know about them looking backwards but like it's crazy you don't have to be an early stage venture capitalist to find these they exist elsewhere sometimes porsche and it was porsche of all things of all things oh i suspect in most of these cases though to take advantage of it you would have had to have kind of been insane like to have invested in porsche at that point even if you had told a person in 1993 hey this guy's coming in he's gonna kill the entry level stuff go back to doing entry level stuff and then do an suv you'd be like uh i how do i get out of this stock like where do i especially because he was the fourth ceo or whatever it wouldn't yeah i don't want to be any part of clutching its straws it would seem but uh it's like buying amazon in 2001 or two when things look the absolute bleakest like that's how you could have gotten a hundred bagger in the public markets maybe even a thousand at this point but like come on who would have actually done that yeah and the 32 billion euro market cap it's not crazy because by this time porsche is doing almost two billion euros a year in operating profit turns out these suvs and making only supercars uh is a very profitable a lot of margin there and china was starting to take off at this time too so the final sort of chapter to the vita king era on the product production side was the panamera the sedan porsche makes a sedan now doug i'm curious here that your thoughts on the panamera i'd always also been like porsche made a sedan it's kind of weird it looks kind of weird but it's kind of weird but it's kind of weird of weird. I think from doing the research now, I think a large part of the intention of it was to really target the China market. And it became successful globally too. But I think the Panamera and the Cayenne too really helped Porsche enter China. No question. Looking back, that has become especially true as Porsche's business and all luxury brands business have grown in Asia. At the time though, I think they just, they had an SUV, they had done that. So it was like, all right, you know, sedan is the next, the next place we want to compete. Let's, let's replicate the success we had in the SUV. And what do you think changed in the corporate psyche going from, we have a very particular way that we do things in a very particular market we serve with a very particular type of product to like, let's have a full product suite, just like everyone else. Probably that 100X growth. Don't you think? I mean, I think they looked at it and said, holy crap, Boxster made us a ton of money, came and came and it made us a ton of money. Cayenne showed up and made us a ton of money. We got cash. Let's like go after, you know, the Mercedes S-Class and the BMW 7 Series, the big luxury sedan. From their German rivals, because they knew there was profit there and they could do it better like they had done with the Cayenne. And honestly, it would have worked and did work. It was not what brought down the company. Not at all. Like you think like if you were naively following along, you might think, ah, and then they got too big for their britches and, you know, they expanded the product strategy too much and the brand came crashing. Like, no, no, no, like this worked. Uh, and it, it worked beautifully. Um, just ultimately, uh, under different ownership. So let's talk about, uh, what we've been alluding to all episode here. The German tax regime still is not very favorable to distributing profits. Just the corporate tax rate alone disincentivizes, uh, spitting off cashflow and incentivizes reinvesting. At this point under Vita King, Porsche is doing everything they possibly can to reinvest in new models, new lines, like they're building a new production facility. What more could they do internally with all the money they're making? They can't do anything. So they start looking around for other places to put the cash. Now at the time there were rumors circulating in the auto industry that Volkswagen had their eye on Vita King and they were looking to recruit him to be the successor to Ferdinand Piast. We're now in work the first time to pull together the best guy over at Porsche over. Let's do it again. So I think, uh, Ferdinand Piast took over as CEO of the whole VW group. I believe in the same year that Vita King became CEO of Porsche in 1993, Ferdinand's obviously much older coming towards the sort of twilight years of his career. You can see how this would make sense if it were true, whether it's true or not. I'm sure Vita King gets rumors of it. Vita King's really, you know, kind of feeling himself here at Porsche, right? Like, uh, he's, uh, hard to imagine a better run. He gets the idea. He kind of has like a, uh, sort of Justin Timberlake, uh, social network moment of, you know, million dollars isn't cool. You know, billion, you know, what's cool. A billion dollars being the CEO of Volkswagen isn't cool. You know what would be cool? If we at Porsche bought Volkswagen, I'll become the CEO of VW group when I buy you. Uh, remember though, Ferdinand Piesch is chairman and CEO of Volkswagen group. He's also a Piesch. He's also on the supervisory board of Porsche because he's also a key member of the family that owns Porsche. Yeah. The sitting active CEO of Volkswagen as a family member of the Porsche Piesch family has voting shares in Porsche. Yes. And he's on the board, the supervisory board of Porsche. So, uh, they thought they were done with the family drama here. It's, uh, uh, turns out there's, there's another chapter. So isn't it obvious then that it would be hard for Porsche to take over Volkswagen? Well, Porsche and thus the families needed something to do with the cash. And at the time when they start this VW shares are a pretty good investment. Like they're not trading super highly. It's pretty clear to them that it's undervalued and VW is a critical partner to Porsche. So I believe certainly, certainly to the public and probably also to the families, Vita King positions this as like, Hey, we're deepening the partnership. Uh, they don't announce like, Hey, I'm trying to take over VW, you know, out of my seat at Porsche September, 2005, Porsche spends $4 billion to acquire 20% of the VW group on the open market. Uh, it's kind of a little creeping takeover vibes that you alluded to in the intro. At this point, Vita King and Porsche's CFO joins the Volkswagen board and then they keep buying shares, but using another patented Bernard Arnault technique, they do it mostly using various derivatives and options contracts. So they're buying like the rights to buy shares in the future. And that's usually ways to get around regulatory stuff, right? Like then you're not exceeding caps if you're buying derivatives rather than the shares themselves. Yes. And in VW's case in particular, there was actually a law in on the books in German law called the Volkswagen law. Oh yeah. This is crazy. That was designed to prevent a takeover of VW because the state of lower Saxony still owned the 20% share in Volkswagen still does to this day. And it was considered sort of a national treasure and they didn't want it to be taken over by corporate raiders. They didn't envision that it would be another German auto company that would try to take it over. So it was impossible for an actual direct takeover to happen. I'm literally going to read from the Wikipedia here because the Wikipedia is extremely well written. Under the Volkswagen law, no shareholder in Volkswagen AG could exercise more than 20% of the firm's voting rights regardless of their level of stock holding. This law was supposed to protect the Volkswagen group from takeovers. In October 2005, Porsche acquired an 18.53% stake in the business. And in July 2006, Porsche increased that ownership to more than 25%. Yes. And part of the reason this all was able to happen is there was a lot of speculation that this German Volkswagen law would be illegal under new EU regulations. In 2007, Wittgen creates a new separately publicly traded holding company for the family's ownership of Porsche. So it's, there's still the Porsche operating company, the old doctor, engineer, you know, AG, operating company. There's now a new holding company that owns 100% of the operating company and the VW shares that they've been acquiring. And this is Porsche SE. Porsche SE. Porsche SE holding. And here's where things start to go awry. Wittgen starts loading up the holding company with debt, with cheap debt, in 2007 to go buy more VW shares on the market. Ultimately, $10 billion of debt that he puts on this holding company. He's got Ferdinand Piesch signing off on this, right? Like, why would Piesch go along with this? I think the best as I could figure out is that Piesch was not happy with the then current CEO of Volkswagen and was looking for a way to get his first successor out. So he, clearly he was trying to recruit Wittgen too. So like he was benefiting from this too. Right. Yeah. He was gonna, have his cake and eat it too, I guess. Right. Heads I win, tails you lose. Yep. So as Porsche is buying all these VW shares on the market with the debt that they're loading up on the holding company, the float of VW shares that are actually available on the market starts shrinking precipitously. Because remember, the German state of Lower Saxony still holds 20%. Porsche now owns more than 50%. Because they had kept buying after that 25%, using all the cheap debt, and they got all the way up to 50%. Right. So that only leaves 30% left. Then you've got all the insiders like, you know, Piesch and everybody else, like who knows how much equity they hold, plus maybe some long-term holders or funds that aren't going to sell. The amount of VW shares trading hands on the open market shrinks to pretty close to zero. And we know that, you know, markets are supply and demand, just like this car sitting behind us. If there's not a lot of supply available, prices are going to go up. Didn't they go up so much that VW like briefly became the most valuable company by market cap in the world? Yes, they did. So as all of this is happening, Lehman Brothers collapses, which this is, you know, this is the black swan event that Vita King couldn't have predicted. Like, he's not dumb. He knew he was taking risks here, but like. Yeah. So Lehman Brothers collapses, and it's crazy what happens. So during the week, after the collapse in October 2008, that's when Volkswagen Group becomes the most valuable company in the world. Hedge funds have been shorting Volkswagen. You get a short squeeze that happens, and the stock just goes through the roof. Because there's all the demand for borrowing the shares to do the short selling. So you would think that this is like the best thing that's ever happened to Porsche and Vita King. They now own more than 50% of the most valuable company in the world. They're invincible. I believe the threshold that they needed to get to was 75% in order to consolidate Vita. VW's financials into Porsche. And so they had announced that their intention was to buy up to that threshold and to get there. So you think this is great, but this is terrible. This is the undoing of Porsche and Vita King because they've got this debt. Lehman's just happened. So clearly they're not going to be able to refinance any of that. And yes, VW's share price is in the stratosphere, but it's not sustainable because if Porsche were to start to sell any of their shares, which they're going to have to, to service the debt really soon, the share price is going to completely crater because this is an artificial price. It's just the short squeeze that it's that high. So Porsche now is completely trapped. They can't sell to service the debt because then the share price will crater. They can't buy because they can't take out any more debt. Yeah. So they're just kind of like stuck in stasis at this point in time. Why can't they sell? Because if they sell, they get a bunch of cash by not liquidating that many shares because it's so valuable. They're not going to be able to sell that many shares at this price before the price craters. Oh, I see. Right. So they basically can't get- Because who's going to be buying? Lehman just happened. Right. Wow. Fascinating. So at this point, Piesch, Ferdinand, good old Ferdinand. Who hasn't moved a single piece on the chessboard. No, he's just been sitting there. He's on the Porsche board, and he is still chairman of the VW board. He's no longer CEO, but he's still chairman of VW. This is when he turns on VitaKing. So he and Volkswagen announce publicly to the market that they no longer believe that Porsche is a financially viable entity. As a deep trusted partner of Porsche's, we believe. And they say that they have to say this because Porsche is a greater than 50% owner of VW. And so they have to disclose this to the market. And that as a result of this extraordinary circumstance, VW, led by Ferdinand, is willing to bail out their partner, Porsche, and save them by purchasing the Porsche operating company for the neighborhood of three to four billion euros to get them out of this predicament. Wait. And then just to unpack the statement a little bit, what he's basically saying to make it more explicit is a key partner of ours went so deeply into debt to try and buy our shares that they can't service that debt and are now about to be insolvent and default on loans. So therefore, we will help them out by, what is it, buying them for. They floated a price of three to four billion euros, which remember, like a couple months ago, this company, Porsche, was trading at 10x that. Whoa. This is literally Ferdinand saying to Vita King, if you come at the king, you best not miss. This is exactly what is going on. Yeah. Whoa, indeed. So there's a whole flurry of negotiations. You know, this is all against the backdrop of it being October 2008. Within a few months, by January 2009, Vita King. Vita King is gone as CEO of Porsche. Supposedly, when he exits the building, he exits to a standing ovation from Porsche employees, which, I mean, he kind of deserves. Even though, like, all of this craziness, he did go a bridge too far. Like, he did save the company. VW does end up buying Porsche, the operating company, in two tranches over three years. They buy 50% up front. Three years later, in 2011, they complete the purchase. It ends up being about $8.5 billion. So between that opening volatility of 3 to 4 and the 32, it lands at 8.5. What's even crazier about this, the undisputed, hands-down, you know, home-run winner in everything is, of course, the Porsche and Pietsch families and Ferdinand. They emerge as the largest shareholders, the So Porsche SE, this new holding company they created that was buying VW shares. Yep. Already owned 50% of VW. And then VW paid $8.5 billion to buy Porsche. So the families own 50% of VW. And they just got $8.5 billion for Porsche. So they already were pretty high up there in the rankings. But after this transaction, they are now in the top, call it, 15 wealthiest families in the world. Oh, my God. So post both tranches, after Porsche AG, the operating company, is fully owned by VW, what does the family own? 32% of the VW group, which remember now, also owns Porsche. But they have over 50% of the voting power. So they control VW group. It's so crazy. VW, the company, bought Porsche, the company. But really, Porsche, the family, owns it all. Owns it all. And they just got an $8.5 billion cash out. Wow. Yeah. Crazy. So here's the thing now. We're now in 2011, when the second tranche of the buyout happens. We're deep in the great financial crisis and the recession. Porsche, the business, it's fine. The drama is all around Porsche, the hedge fund. You know, and the financial shenanigans and the families. The actual operating business, the cars, sales are fine. Porsche has one down sales year, only one during the financial crisis. And then everything else is up. A big part of that is the investment in China. And China starts really, really growing through the early 2010s for Porsche. Also, this is when they come out with the 918 Spyder. And their next supercar at this moment in time, there's all this, oh, Porsche is now owned by VW and Consternation. They're like, yeah, we can still make the best cars in the world. Yeah. And the 918 helped to introduce plug-in hybrid technology, which Porsche knew it would be going in that direction. And so the 918 was like an example we were talking about before of how they covered the Cayenne with the Carrera GT by saying, we're still doing this. The 918 helped them say, hey, we're going to make hybrids, which is viewed as this like, cheap, you know, like little car, the Prius. And so you think of, well, here's the hybrid, and we're going to do hybrids, but we're going to start top down with this crazy, crazy supercar. Talk about supercars for a minute, because I think it's important to understand, like, they don't always make a supercar, right? Right. It's like a once in every 10 or 15 year cycle they're making one. But it's a very, yeah, it's a rare and special thing that they do it. And it seems to be they do it only to kind of prove something or prove a technology. Like the 959 was all-wheel drive, and this car was kind of this new production facility. And the 918 was the plug-in hybrid technology. And how many years do they make them for when they decide they're going to do it? It's a short model run. So this car, they made 1,270, which is considered a lot for a supercar. The 918, they only made 918 units. And in fact, that was considered a lot for a supercar. Its biggest rivals at the time, which were the McLaren P1 and the LaFerrari, they didn't combine to make 918 of those. But the 918 Spyder is what, a $2 million car? These days, yeah. It was, it was new. It was like $900 or so, maybe a million after you got a bunch of stuff, and it's double. It's done well. All the supercars have done well. Well, Ben, I'm sure you'll talk about this in a minute, but Porsche is the master just of like, you, there is a base price, but you're not going to spend the base price. You're going to spend like 40% more than the base price. But even at, even if you figured the base price was like 900 grand, they made 918, you do the math. Doing a supercar is real money to be made fairly quickly, as opposed to a Cayenne that's a long tail, and you make them over a long time to spread out the cost and all that. Yeah. This supercar was a plug-in hybrid. I don't think I ever knew that. All, all supercars are now. But the 918 Spyder was Porsche saying, we're going to go into this plug-in world, because they knew what was coming up. I mean, we'll get to it in a second with the Taycan, but they knew what was coming up, that hybrids and electric cars were going to be a thing. And so instead of introducing that with a, with a SUV, for example, which is where they should have, right? Because that's what the market wants it. They said, no, we're going to do the supercar and show people we're going to do it and we can do it well, and then we'll trickle it down. What did the car world think of that? Man, the 918 Spyder, being a plug-in hybrid, it had a electric component, but it also still had a massive V8 in it that had a zillion horsepower screaming and all that, you know. And it was the same with the LaFerrari and the McLaren P1. They still had massive engines also. So it was fine. The next crop of supercars will probably be full electric. And so that transition I think is going to be more controversial. The interesting thing that's setting, seems to be setting Porsche apart now though, is that they're standing behind it. Ferrari has already said that the technology's old, all the plug-in stuff, we don't want to be any part of the LaFerrari. Like no one's really sure how that's going to age. Oh, those are going to be orphaned cars. Exactly. Orphaned multi-million dollar cars. Yeah, exactly. It's a scary situation if you own that car and the battery's gone, you don't know what to do. You go to the supplier. But Porsche has always been big about standing behind the cars in part to preserve resale value and to make sure that owners of the next supercar know that they'll be protected. And so like this car is already almost 20 years old, all the parts are still available, that kind of thing. That's the smart brand thing to do too. It is the smart brand thing to do, but it's not easy. Like if you really think about it, plus Ferrari, they don't need to. They don't care. They're going to make the next one and the next one. They keep finding rich people. They only make, what, 13,000 cars a year at Ferrari? Yeah, it's a small operation. But like, Ferrari just still don't really care about their customers all that much. What's the rule of luxury? Dominate your customer. Ferrari was owned by somebody at some point, though, right? Yeah, there were all these, oh, God, Ferrari's a story that is a crazy one also. But the Fiat group eventually had stepped in because Enzo had just driven the company. But in his pursuit of racing, had like driven the company into financial ruin. It wasn't his pursuit of, you know, derivatives. No, it was quite different. It was actually a very Italian thing versus the pursuit of derivatives is kind of a very German thing. But, yeah, that was a real bad situation also. None of those companies are independent anymore. It's not really possible either because of the way that regulations are structured, especially fuel economy. You have to spread out your fuel economy over your corporation and you have to hit certain targets. And so, actually, this in some senses may have worked out well for Porsche because it would have been difficult to get Porsche to kind of work on the corporate average fuel economy standards because all their cars are kind of inefficient. But because they're under the Volkswagen umbrella, you can kind of get that whole spread and it works a little bit better. Now is a great time to talk about a new partner of ours here on Acquired, Legora, the agentic operating system that is redefining how the world's best legal teams work. Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle. More complexity. Any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time. And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And Legora works. Where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months. Truly insane. Insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time. Or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com slash acquired and just tell them that Ben and David sent you. Yeah, okay. Well, great. So this is perfect to wrap up on the history of Porsche here. As part of the VW group, they come out with the Macan, which is a huge success, both in America and China. And this is the mini compact SUV. Right. The Cayenne is the midsize and the Macan is the compact. Okay. Exactly. And a lot of Volkswagen stuff shared with all these cars. Engines are shared across tons of model lines now. Yeah. Which is such a departure for a Porsche. That's right. It's for an engineering company to doing this kind of sacrilege. But the engine in the Cayenne Turbo, which is the best Cayenne, is in. The Lamborghini Urus, an Italian car. The Bentley Bentayga, a British car. But Volkswagen owns all of these. It's in the Audi RS6 and the Audi SQ7. It's like everything is now just spread across all these brands. This is a little bit echoes of our Lockheed Martin episode that we just did. The heritage of the great airplanes, the great Porsches, is this independent, you know, engineering, small team culture. But to operate today within the content, you have to be part of this. So the Macan's a big hit. And then we just alluded to it with the Taycan. The Mission E is the concept that they introduced in 2015. So like pretty early. I guess the Tesla Model S came out 2013, 2012. 2012 model year. So Porsche was pretty early with the concept for Mission E. Yeah. Not everybody was sure that was going to catch on. Electric vehicles, I don't know. I don't know. And a lot of people were slow as a result. Yeah. In fact, like entire nations were. Like Japan is five years behind everyone in electrics. It's the weirdest thing. It's like they just like woke up last year and were like, oh, my God. This is going to happen. In the car world, I mean, at least five years back. Toyota just started, just came out with their first electric car like yesterday. Like I'm not exaggerating. It was like eight weeks ago. Wow. We got to talk about that another day on Acquired. Like how did that happen? I mean, they were the. How did that happen? They were the forefront of hybrids. Totally. The Prius, they invented it all. And now they're like, electric? I don't know. They're still like waiting and seeing on electric. Wild. So the Taycan comes out. It's a very phenomenal car. Like I think people are a little unsure at first, but then it's super well received within like three years. Yeah. No, it's. It is. It's been well received. It drives like a Porsche, which I think was everybody's fear about an electric car. That you'd lose the engine sound. You'd lose the feel of it. But the Taycan does indeed drive like a Porsche. Why do you think they came out with a sedan? It was a mistake for sure. Yeah. Yeah. I think probably because development started about when they started Mission E. And that was in 15. And sedans were still a big part of the market. But most brands now that are coming out with electric cars as their first car are coming out with SUVs. You look at Rivian, Pure SUV and Truck, Hummer EV. There's a ton. And I think Porsche made a mistake. Yeah. But relative to the other traditional auto manufacturers, I get the sense Porsche got to be in the top tier of like best positioned for an electric feature. Yeah. Yeah. No, absolutely. And they'll continue to innovate. There's an electric Macan is coming soon. So they say. And so it'll be fine. And Taycan. I mean, one could argue that Porsche needs to come out with an electric sporty car first because they need to. If you come with electric SUVs. That's your first one. It's like, eh. They have no plans for an electric 911, right? I mean, that's what they would tell you if you ask them. That's what they would say. But let's be honest here. Like it's the future is electric. There will be electric versions of all these cars and probably within our not so distant lifetimes. They will be purely electric. Interesting thing about the Taycan. So you mentioned the next supercar will be, you know, an all electric one. I haven't driven in a Taycan. I have watched videos of people driving it. I'm like. What do you what else do you need to do to make this a supercar? You know, the thing about electric cars is they all can accelerate incredibly well. And that's like insane. And Taycan is faster than this. It's faster than everything. It does zero to six in like two seconds. But isn't it also like tuned to drive like a track car where your 15th lap is going to be just as performing as your first? Yeah. And so it's beneficial in that, too. But at the end of the day, a four door car, especially one that's made in not limited quantities, is never going to have the effect that like a supercar halo car has on like really showing people what a brand can. Like do. And so they will, I suspect, in the next couple of years, they will come out with the next supercar, which will be, you know, look like this. And they'll only make a thousand and it'll cost two million dollars and it will be fully electric and do zero to 60 in one and a half seconds and even more ridiculous. What do you what are the performance characteristics of the next generation of supercars going to look like? Like, what do you humans can't go? Yeah, I think about that a lot. Second. So I think that will continue to help the values of these cars increase, because at the end of the day, as cars age, they all get slower. Slow, right? This car is now not that fast by modern standards. So you start to look for other things that make them special, which is the feel, the sound, et cetera. I was I had a press car dropped off the other day, a Kia EV6 GT, which is the electric Kia crossover. It is sized and designed to compete with like the Toyota RAV4. OK, but this is the high performance version does zero to 60 in like three point two seconds. It's faster than a Kia GT. So, yeah. Like, what does a supercar even mean anymore? Like, ultimately, like, what does it offer that a Kia EV6 GT for? By the way, fifty one thousand dollars does not offer. And the answer just has to be like, it's lower, it's wider, so it can it handles better. I mean, that's one of the big missing things from a lot of these fast accelerating electric cars is that they're not necessarily like sports cars, really. They're fast, but they're not really sports cars. And so I guess that's going to kind of be the future. But you're right. Power is being democratized. Everyone can now access a car that does zero to 60 in three seconds. Right. And so I don't know. It'll be interesting to see how the sports car responds. Well, so that brings us to today. Um, when or I guess more accurately last fall, September 2022, when VW group re IPO Porsche, the Porsche re IPO is the largest European IPO of all time. The initial market cap of Porsche at trading was about seventy five billion dollars today. That's up to about one hundred and fifteen billion dollars. Call it nine months later. As the investment bankers would say, like there was a lot of value unlocked. By making this its own company, which I think is legitimate. I think there's an element to being able to own one of the premier luxury companies in the world without having to commingle it with a bunch of other stuff. And so, like, all shareholders of Porsche can purely just be shareholders of Porsche. And you when you look at the financials and you understand, like, OK, they have incredible margins relative to you. Look at the rest of VW's portfolio. It's interesting, though, like, Doug, to your point, Operationally, though, you can no longer extricate these companies. So you can financially extricate them. Purportedly. But even then, how do you financially extricate, like, development costs of a powertrain that's used in multiple vehicles or a platform? I mean, the Taycan, there's an Audi version of the Taycan called the e-tron GT. How do you, you know, it's all intermingled. So, yeah, if it's not actually operationally any different, then you do have this question where you're like, okay, value was unlocked by just looking at the market caps. But, like, actually what happened there is you got better at marketing a security. Not you literally created value inside the company. So it's interesting, Ludwigson, Carl Ludwigson, who wrote Excellence Was Expected, he published a new edition of it last year. And in the foreword to it, he said, the reason I did it now is that the old independent Porsche is done. Like, this is a completely different company now, and I can fully put a bow on that original Porsche. Yeah, yeah, yeah. So even though. Even though there was a re-IPO of Porsche, it's never going to be the same old independent Porsche. Yeah. And by the way, you can choose to buy Porsche AG, the independent spin-out of VW, or you can also, on the stock market, go and buy Porsche SE, the family holding company. Oh, I didn't realize that it's still on the market. So some other interesting things about Porsche today. The family, as we mentioned, is complete control both of VW and Porsche. So in some ways, it's still the same old Porsche. Yeah, even though it's all commingled. Here's the sort of nail in the coffin, in my opinion, argument on is it a separate company or not. Oliver Bloom is both the current CEO of VW Group and Porsche. Yeah, there you go. When you share production facilities, and you share distribution, and you share a CEO, and you share components, and you, like, at what point, in what way are these separate companies? Right. He was right. He was right in everything that he was doing. He just, he didn't win the Game of Thrones. Right. Fascinating. So digging into the business a little bit, they do over $40 billion a year in revenue right now. When you look at the breakdown of that, interestingly enough, two-thirds of it has come from SUVs, and there's a good amount of it that comes from the Taycan, too. So the 911 has sort of grown slowly over time. The 718, that's. The Boxster, Cayenne, not a lot of revenue coming from that. Yeah, that's. Sports car sales just slow. Yeah. It's just not the same. But it helps give them more legitimacy. Yes. And the Panamera does have pretty decent sales, but still nothing compared to the monster that is the SUVs. Yeah. When you look at where they're sold, this is quite interesting. China is, as Porsche would account for it, their largest market. But the reason that I put that caveat in there, because it's at 26% is China. They split out Germany from Europe and call them two different regions. So they have Germany. True Germans, like a true German would. Like, Germany is 10%, and rest of Europe, excluding Germany, is 23%. So, you know, all of Europe together would be bigger than China, but Germans. One of the interesting things is, you know, the Chinese only buy four-doors. They only want four-door cars. There's almost no. Because there's no heritage Porsche in China. It's a luxury good. It's a cool brand that sells SUVs. And there's a lot of chauffeur-driven. There's a lot of chauffeur-driven vehicles there. And so, like, they don't. It's almost none, Porsche sports car sales in China. Wow. Hard to believe, but we think of Porsche as such a sports car brand. It's like part of the ethos of it. They're just like a kind. Right. Wow. Yeah, I mean, we're used to it now, but I remember the first time I was seeing Porsche SUVs. It's like, well, that's a sports car brand. This is weird. Right. But for them, they never had the sports car brand. So it's just like normal. It's crazy. North America is very close to China. It's 24% in terms of sales. And then the rest of the world is about 16%. So interesting thing when you start to look at both the amount of cars that they make now, because it's huge, and the margin structure associated with that. So last quarter, they delivered 80,000 cars, and that's growing about 20% year over year. Last quarter, they delivered 80,000 cars? Yes. Wow. So last year, they delivered about 350,000 cars. Man. So this really is a scale organization at this point. This is not Ferrari. This is not Lamborghini. These are mass-manufactured vehicles. And I know they would say, oh, we're not a mass-market thing, which is true in some ways when your average selling price is $110,000. But if you're making $350,000 of something, that's a mass-market brand. Yeah, it's interesting. I compared the brand to Rolex earlier. I think from a brand perception, that's true. But from the operations of the company, really, it's Louis Vuitton. Louis makes a lot of stuff. Yeah. Yeah. Yeah. Yeah. Yeah. Yeah. That is the correct analog. So I had this in my notes much later, but I want to bring it forward right now. Porsche is Louis Vuitton. Ferrari is Hermes. Yeah. And I think that this whole time, while researching, I just had this broken thing in my brain where I was like, how do they make so much stuff when they're Hermes? And they're not Hermes. Yeah. They were once Hermes, but as soon as they started making the SUVs, that's not who they are. They have tiered access to luxury. Like, different luxury products with a shared brand that unifies them. Which is funny because people see it as such a high-end brand. It's almost like the SUVs have managed to, like, get under the radar of the people who buy the sports cars. And the sports cars have this, still have this elevated viewpoint, even though you can actually go to a Porsche dealer and lease them a con for, I don't know, $750 a month, whatever it is, you know? Right. Right. On the scale thing, though, there is another order of magnitude up, and these other brands do feel much cheaper. So. At around $2.5 million a year is BMW and Mercedes-Benz. And it does feel like Porsche is in a much different class than BMW or Mercedes-Benz in terms of the sort of hoity-toity-ness associated with it when you get to drive it and you get to own one. And I think that clearly shows. And the question is, if they made 10 times as many Porsches, would we all feel the same way that, oh, it's just a BMW? Probably. Like, there should be an inverse relationship between scale and brand perception. But they have managed to find this, like. Like, mismatch or, like, to your point, it's like skating under the radar, where they are able to make a lot of SUVs and still maintain what they have. And the question is, for how long? Right. Or at what scale? At what scale? Like, at what, if it doubled again. Like, it's interesting about BMW, because if you think about it, if you saw Porsches as often as you saw BMWs, would it be special? Of course, the answer is no. So. What do you think the average selling price of a Ferrari is across all there? $250. $330. $330. That's insane. That is insane. 3Xs. 3X Porsches. 3X Porsche. And how many Ferraris are made every year? 13,000. 13,000 versus 350,000. Yes. It's so funny, because the enthusiast world, there's often a, are you a Porsche person or a Ferrari person? Like, they're not really. Right. These are two very different beasts. Yeah. And it's fair to be like, are you a 911 plus supercar person or a Ferrari person? But the rest of Porsche shares the name Porsche, but is. It's a completely different thing. Right. Yeah. They're nowhere near each other. It's almost like Porsche should go get even more aggregate market cap by like spinning out just their like hyper car there. The 911s. Yeah. Like just the real sports car. The stock ticker is P911. Is it really? Yeah. Yeah. In Germany. Man, that's crazy. Ferrari's $330, you said? Ferrari's average selling price is $330,000. $330,000. It's interesting, right? Like, I mean, you're Doug DeMuro. You own a Correa GT. You don't own a Macan. Yeah. Well, yeah. I mean, I, but they're cool. I mean, I would get one. I recommend them to a lot of people. But that's a good point. Like, I haven't went and got a Porsche SUV. Truthfully, the reason is ridiculous. I don't want to drive like things of that name brand like on a daily, like my wife would never be seen in a like a Porsche. Do you know what I mean? It's the funniest thing because one of my, David, my closest friends drives a Porsche Macan and his wife drives a Porsche. And I'm like, oh, this is a totally different thing. This says something very different about who I am. She was driving his car the other day and she was saying, oh, I hate being seen in this Porsche. Or that you don't want to be driving around a $75,000 Porsche. And yet this thing that you have. It's ridiculous. I know. It's an interesting point. I never really considered that. I just, I like to be casual for my normal cars. Also, I think that like having the Porsche SUV is kind of like a, it's almost more in your face than this. Like if you bought a, you're a connoisseur. If you have a sports car. Yeah. If you have a steady SUV, it's like, that could be. I love them, by the way. They're awesome cars. It just doesn't offer me. Right. It's like getting like the Masters logo embroidered on your golf clubs. You know, it's like, okay, like I know you didn't play in the Masters, but like. Okay, that's cool. Right. That's exactly how I look at it. Like, okay, that's, that's fine. But I just, it's not, I'm going to, I'm going to stay kind of low key in my normal life. What do you think I drive? It's got a Model 3. That's a good guess. That's what David drives. And that's probably what I would. Mazda CX-5. Oh, yeah. Okay. Yeah. Those are good cars. The Porsche Macan of the mainstream. Exactly. The Porsche Macan of Mazda. It's the Japanese Porsche Macan. If you ask my colleagues, they would say that, but I think it just isn't normal, but I like them. They're good. I recommend those to people too. Okay. Some more, back to Porsche. A couple other interesting observations just for listeners trying to keep track of home of like, what are the profiles of these businesses look like? I always think gross margin is an interesting place to look to understand the strength of because it's basically showing what can you mark up over your cost of goods sold and sell it to people and still have them swallow that price. BMW, as we mentioned, 10 times more units of BMW sold than Porsche's are down at 17% in terms of gross margin. So they really aren't marking up much above their cost of goods in order to ship those cars. Mercedes is a little bit better at 23%. Porsche is at 29%, so about 50% higher than BMW. Ferrari is 48%. So people who are buying Ferraris do not care what it costs. People just pay and pay and pay. And by the way, the $330 average price thing, I'm just still astonished by it. That's an unbelievable amount of money when you really think about it for 13,000 cars a year. And to put it another way, because let's round 48% to 50%. If you have 50% gross margins, it means you go buy a bunch of stuff, you assemble it, and then whatever it costs you, you double that to sell it to the customer. I mean, Ferrari's still charging like $2,000 to put Apple CarPlay as an option in their cars. I am dead serious. Like, heated seats are like $800 extra in Ferraris. You get the idea. Yeah. Ferrari options list will go crazy. So, switching gears but staying on gross margins, because David, you brought up LVMH earlier. LVMH's gross margins? 68%. It turns out you can mark up leather way more than you can mark up cars. Like, at some point, there is some sensitivity to like, you can't just make every Ferrari cost $8 million because like, there's so much real hard costs in cars that are just not in other luxury goods. And so, you have this opportunity to generate unbelievable price premiums in all the stuff LVMH owns. If you can touch it, if it feels good on your hands, or it looks good to your eyes, or it smells nice, you have the opportunity to mark it up way more than sitting in something that is going to thrill you. How interesting. This is really interesting trying to understand which of these businesses you'd sort of rather own. And gross margin isn't everything, but it is amazing that LVMH is truly in a league of their own on gross margins. Yeah. Going into doing this episode, I sort of wondered in the back of my mind, has Bernard Arnault, and LVMH ever made a run at any of these luxury auto companies? And if they have not, maybe this is the reason why. Like, they're just in a better business. Yeah. It's hard businesses. It's a lot of stuff. It's a lot of stuff. It's a different business, and it's a lot. Distribution's harder. Yes. And it takes a really special type of person and team to run it. I mean, it's engineering and art, whereas there's not engineering in anything that LVMH owns. I mean, I'm sure there's people who work there whose title are engineer, but. It's craft. No, it's crafts. Yeah. It's craftsmen. Man, 68%. That's. Yeah. So if I were to guess, I would say maybe Bernard Arnault has kicked the tires on like Ferrari, Lamborghini, but more on like licensing agreements than trying to own those businesses. Because I just don't think it actually works into the rest of the flywheel in the same way. Like, you got to own a factory. That makes these cars. You got to do all the R&D. Plus, scalability's harder. And you alluded to the dealerships and the distribution. Distribution's hard. You're shipping stuff on giant boats all the way across the world and all that. Should we talk power? Move into analysis here? Let's talk power. Yeah. So for any listeners who are new, and based on the Lockheed episode, a lot of listeners are new. There is a section we do called power, which is a way that we try to figure out what enables a business to achieve persistent differential returns above their nearest competitors. So why are they more profitable on a durable basis than other people who compete against them? And this is always a fun thing to try to analyze because you're like, what actually is it for a business that has pricing power that they get to mark up their goods? And so we just talked about Porsche having better gross margins than BMW or Mercedes, but not as good as Ferrari. Ferrari couldn't make the number of cars that Porsche does and maintain those margins. So that's not really a fair like direct comparison. In terms of who their competitor is. But BMW also makes 10 times more cars. So that may not also be the right comparison. And this, I think, is an interesting point, which is Porsche is kind of in a league of their own in making the number of cars that they do. It's like this magical sweet spot where they get to be a luxury brand without making so few things that you can barely, you know, even work with the company. Yeah, they definitely especially relative to Ferrari have scale economies being part of the VW group. Right. That they can be in SUVs in a way that Ferrari can't. I think you're right that scale economies enable them to be in the SUV business, which has great margins. Yep. And that's a that's a thing that you would need to have all these deep partnerships with other other car brands in order to do that or owned by one. Yeah, I think that is a differentiating factor against Ferrari. But obviously, lots of other car brands are in the SUV. Right. Business. The heritage is obviously an enormous factor. The brand. The brand is the obvious big one. Yeah, the big one. I suspect that the German engineering thing also plays a role. Like I think now not against BMW and Mercedes Benz, but certainly against like the Japanese. I'm sure their margins are much, much higher than the Acuras and the Lexuses of the world. And they even though when you really look at it on paper, it doesn't make sense. There's there is some level of like this is a the German engineering. Thing, like you alluded to earlier, has this incredible reputation that helps them. So this car is just simply built better. It's European. It's German, you know, and does that I think for a long time that expressed itself in reliability of Porsches relative to other luxury car manufacturers. Today, is that as much is reliability as much an advantage for Porsche as it was in the past? Supposedly, reliability is still excellent, supposedly based on the J.D. Power studies and all that. Now, the question of whether it's actually important for people making decisions by the cars, I'm not so sure how many of those SUV customers are leasing and don't really care if the thing stays reliable. I don't know. But there is some component of just like quality that you just feel. I mean, it's certainly true. So you get a BMW or Mercedes Benz and it's just not as nice. It's not the same. Like you have this feel. It's it's it's certainly more special. There's a specialness to it. OK, so moving through them branding. Yes, obviously. Like especially if if you're trying to enter any space and compete with a luxury brand, you don't have the heritage. There's just no way that you have the the 75 years of people believing in your brand and thus willing to pay extra margin dollars for it. So that's the obvious one. And you can't you can't manufacture it either. No, like there's there are literally any more heritage automotive brands, right? They are. They're just going to take 75 years, right? Maybe. I mean, like the the there is never going to be another situation where the link between racing and production cars is like it was when Porsche was getting started. Yeah, but there will be another racing like there's another thing. I think that's that's myopic to think that like 75 years from now, people won't obsessively care that some new brand was forged in the twenty twenties that had some other je ne sais quoi about it. That's like the equivalent of racing versus production. Cars you could imagine at some point, Tesla is a heritage brand. People are going to be like there was this crazy eccentric founder. Yeah, no, I agree with that. But it will take yeah, as many decades as you think. And it'll have to be for something else, though. It can't be for racing like it's something else related to the cars. Right. It would have to be for something else. And to your point, Doug, performance is a commodity now. The Koreans have been around for 25 years, and there's no like emotional attachment to any of those cars, even the older ones. I don't know. Brand is it. Brand scale economies enabling the SUV line. I think that was a good one. There's not really counter positioning. I don't think there was in the younger days, especially the racing younger days, especially with the aggression of Porsche's advertising. Porsche ads have been some of the most iconic just brand advertising of all time. And they were brash. The reason it's counter positioning is because a lot of car like very high end cars would never dream of showing their brand in such a gritty way and giving their brand voice such a risky proposition. I'm thinking of two in particular. Do you have any? The most famous one, of course, is the 993 turbo, the arena red 993 turbo. And fortunately, they would put up one picture of the car and then there was always a tagline. That was like the thing for decades. The famous one was kills bugs fast. That's what everybody remembers. So good. So good. The other one that I'm thinking of is nobody's perfect. My favorite. That ad was great. I had one for my 996 turbo that I owned 9/11 years ago and I had it framed and it said calling it transportation is like calling sex reproduction, which is a great example of no other luxury brand would touch that. But that yeah, I loved David. I had the same favorite one of nobody's perfect because what they did is the bulk of the ad when you look vertically down is the top ten winners at Le Mans and Porsche has nine of the ten. And it's just Porsche, Porsche, Porsche, Porsche, Porsche, Porsche. Like number eight. Yeah. And that is Porsche, Porsche. Nobody's perfect. Nobody's perfect. So good. Yeah. All right. So that's modest counter position. but not really anymore um switching costs i actually don't think there are switching costs in the car industry i think there's this really interesting thing where like uh doug you're gonna laugh my car before the mazda cx5 was a honda crv and like i i i completely re-evaluated with flat with fresh eyes there was nothing about being a part of that old ecosystem that carried forward to the new ecosystem unlike apple where you're dialed into everything yeah yeah less than that is that's gonna become less true i suspect with all the tech that's in cars but yeah i agree up until this point it certainly hasn't been a thing yep there's no network economies there's like really no benefit to you own a porsche therefore i own a porsche and i get value out of you owning a porsche it's not particularly a thing other than we can like go to cars and coffee together right uh process power this is probably where i would slot german engineering uh of all the things that we've talked about and then the last one cornered resource there's a particularly cornered resource here it's not like the the square footage and stuttgart that they own is like some magical thing yeah so all right that does it for power playbook we've talked a lot of playbook along the way but i'm curious for ones that jumped out at you that we uh we haven't hit yet yeah i know we just talked about it a bit but um for me the racing thing is interesting even though we didn't spend that much time on the details of it throughout the history i don't know that we've covered any other companies where there is this kind of like adjacent activity to the core um business of the company that adds so much to the brand value and is worth investing in i'm just trying to think if there's anything else like this but uh i mean porsche has invested billions in racing in all sorts of racing but it's not like there's like uh software competitions out there that you know you could enter your software in to like build your brand prestige yeah that's right that's an interesting point are there any other companies that are interested in racing that are interested in racing that are interested in doing things like that or industries that have like a showcase right like a very expensive showcase where you have to go build a completely different product line or you know what is like this is the athletic apparel industry um and nike yeah like they spend yeah all of their marketing budget on athletes one of the biggest ones that jumps out for me is the brand continuity this idea that if you loved anything we've ever done we should be able to fulfill that dream for you today and i think that's a really good idea and i think that's a really good idea and i think and not with the exact same thing necessarily like we're not going to sell you the exact model that rolled off the line in 1977 but like you get to participate in the feeling and you get to feel the same way about our brand today that you did then and we're going to find all these interesting ways to provide you fan service it's almost like going and watching the new star wars movies where if you like the original films even though these aren't like the highest like highest grade directing and writing in the world like we are delivering all sorts of fan service moments to you and i'm not saying that like porsche is not making the best cars in the world they make some of the best cars in the world but they also provide all these opportunities for fan service it's worth a huge multiple of what you invest in it if you can align everything correctly right it gets back to the 40 50 year sales cycle with this too right everybody dreams i mean it's your your whole life you dream i grew up dreaming of owning a porsche which is again kind of funny as we talk about the suvs and the volume they do if you're a little girl or boy you don't dream of owning a porsche you don't dream of owning a porsche you don't dream of owning a porsche like like kids kids are getting dropped off in those at school is kind of my point but you do dream of a porsche even though it's the same thing right doug you've talked about this when you worked at porsche a decade ago and you were much younger like they didn't pay you much but you got to drive a 911 and that was like the coolest freaking thing everybody wanted to work there we get unsolicited resumes all the time blah blah blah and like pay wasn't great and but like you had that name you know i worked for porsche that's so cool and just being a part of it and then yeah having the car was a huge deal i love it all right well grading feels a little bit odd on this episode and we killed grading but we do have doug demiro with us so we are going to give porsche a doug score and it's an acquired adjusted doug score it's uh you know we can't grade the entire company on handling so we got to figure out some categories that we can evaluate them on as a i don't know that there are any weekend categories for uh business yeah no not really all right so david what what criteria you're thinking for acquired adjusted doug score we simplified this down to um to just three categories for the acquired doug score um revenue growth profitability and defensibility like would you want to own porsche as a stock uh and i think those are the three components sort of closing your eyes to where they're trading today because you always have to like evaluate entry price and all that but like yes all right are you excited about the company's prospects 10 20 30 years from now yeah all right so let's do revenue growth first growth has been impressive at this scale not at the rate of the highest growers that we have seen but still nonetheless impressive prospects going forward though for revenue growth i think are still quite strong we're obviously in a very different market environment than we have been the past few years but porsche is still quite strong is incredibly well positioned on evs relative to other traditional manufacturers yep so i think they're strong as they electrify the rest of their lineup strong uh bull case for revenue growth there i also think that even as we're heading into a more depressed macro environment in the past few years i suspect porsche will be more resilient in their growth than other uh other luxury brand manufacturers so i give it a seven on revenue growth potential i basically agree with you numerically i have one knit on on uh them versus other luxury manufacturers it sort of depends how you define luxury like i think they'll fare better than mercedes and bmw in a downturn and like way worse than ferrari i think they're they're in this interesting place where like they have it's more of a competitive buyers right because so much of their revenue is based on those sevs that probably will not be as resilient as right there are macan buyers who will become q7 buyers yeah q5 buyers yeah yeah totally uh ferrari really isn't a league of its own though the broader universe of bmw mercedes all the japanese brands tesla etc uh in america ford you know all the ford brands the chevy brands oh yeah i think porsche is very well positioned in a recession than like almost any other car company yeah yeah there's also this other thing of like you alluded to the colors the money they're charging for colors like they've done this they've perfected this with so many options and people are just paying it and paying and paying it and it seems like there's no end to like what porsche can kind of fleece their customers for and it just seems like that's only going to continue to be more and more of a thing going forward there's become this entire subculture around like specking your porsche in this like perfect way and that is obviously big margin stuff for them yeah so i'm seven you're seven i think we're pretty unified seven yeah seven out of ten yep uh next is profitability quite quite strong for the automotive industry yeah very strong um not strong relative to the technology industry and software or apple that's right we didn't say that earlier but uh porsche is a 29 gross margin apple's a 43 gross margin right and i believe porsche's operating margins are in the high teens low 20s i mean i'd love to own a business that has 20 of every dollar that i earn coming out the bottom that's a great business when you're earning 40 billion dollars yes that's a great business i think i'd go seven again on profitability it's a nine for the auto industry yeah and it's like a four compared to most businesses that we study on acquired because we only study the very best businesses in the world it's not a media business it's not a technology business right i'm sitting here thinking seven might be a bit high margins are pretty impressive considering that's the car business that's what i'm sitting here the car business requires so much just so much cost yeah i'm gonna revise my score down to five for the ease of the episode we're agreeing on a score here okay i like this five feels like a good score and honestly like i think five is the highest score you can give in the auto industry on profit unless we're talking about ferrari apparently yeah which is like almost not in the auto industry it's like a completely different luxury category yeah that's so true just happens to make cars so i am giving um uh because cars you cannot give a ten nine eight seven or six i am going to give porsche a five right in terms of profitability yeah right that makes sense what was the last one defensibility yeah so this is the biggest question does porsche's margin profile and customer love and brand value just only go down from here as they continue to grow like will we think of them as a bmw in 10 years when we see them around the streets i just don't think so from when i worked there till now it is amazing to me how much more people have become obsessed with porsche's every cars and coffee event has become sort of a de facto porsche event the used ones the vintage ones have just shot up in value to an unbelievable level porsche is more loved now i think than at any other point in its history now will it diminish as a result of that probably right you can't you can only be at a certain level for so long at a high level for so long but it's been incredible to me to watch porsche's rise even just over the last 10 years and how much people like love it and obsess over it compared to when i worked there until now it is amazing to me how much more people have become compared to how it used to be? - It isn't Ferrari. that brand equity that Ferrari does but it's got more than you'd think and it's especially got more than you'd think for a company that mostly makes SUVs I think you put it really well earlier when you said people are like oh are you a Ferrari person or a Porsche person and like the fact that Porsche gets to be in that conversation that question is being asked right at this scale nobody's asking are you a Lexus person it's like they're getting away with murder by being lumped in right there right somehow they were able to both produce an SUV that gets them 350,000 units annually yes but also mention the same breath as Ferrari in terms of like enthusiasts I'm like literally a 10 out of 10 on this because I think this is a thing that I still don't really understand how they executed this so well and they've done it better than any other company in the world right it's probably true they went from making the 911 the everyday supercar to now they're like an everyday supercar company right where they have a whole gradient of everyday supercars that you can buy but they're all everyday supercars and yet people still dream about it's crazy I agree I completely agree and again the love only seems to be growing even as their model line expands to what we would consider to be less desirable cars it's amazing like you said it's amazing they pulled it off I think that's right so my barometer for this is something I took from the LVMH episode of evaluating brand power can you kill it is there anything that could happen that would completely kill Porsche I don't think so nothing that they would realistically do I mean but even okay let's say they did because you know this is what we learned from the LVMH episode Gucci everything you could think of to kill a brand they did that but the heritage there it can always be resurrected right Gucci is always going to be valuable the regular individual still has this thought of Gucci as like holy crap you can never completely eradicate it and I think Porsche is the same thing once the brand gets to a certain level is it even possible to kill I don't think so and once you reach that level that's when you have real brand power yeah and I think Porsche is at that level because let's say they make a bunch of decisions and they kill the company it goes bankrupt somebody will buy it out of bankruptcy huge value still in the brand name and huge value is still there yeah alright 10 out of 10 so that gives the acquired Doug score for Porsche a 22 out of 30 out of 30 which by Doug grading standards is pretty good that's pretty good your highest Doug score ever is 72 or 74 something like that somewhere in that range yeah out of 100 you can't get any better than that so Porsche is at the top quick carve outs I'll start because I've had no opportunity to consume any media in the last three months that is not specifically for acquired research I have a random website that I haven't used in six months but I used six months ago and it was awesome to recommend and that is resortpass.com have either of you ever been to resortpass.com it's like Airbnb for amenities at resorts oh this is oh this is awesome so how did I not know about when I go on vacation I typically won't stay in the really fancy hotel my wife and I will just like book a condo or an Airbnb or something and they're right next to really fancy hotels right and so what resortpass does is they go to the hotels they say look I know your pools are like not full most of the time can we have some and I don't exactly know how real time their inventory is or if they are able to like buy big blocks of it up front but for like 100 bucks a day or 200 bucks a day or 200 bucks a day you can go and get a daybed or a cabana or you know have the amenities of the resort of the fancy hotel dude you've been holding out on me so I Jenny and I do this we will we'll do the same thing you do but like I didn't know there was a platform for it we just call the hotel and see what you can is there a day or we'll book a massage at the spa and you're like oh and then with the massage you get the like right but now it's analog resortpass over there you're like the Carrera GT of resortpass yeah oh great my carve out is I go down these YouTube rabbit holes which is probably how originally I got to you but I've been on a Seinfeld cast interview oh yeah rabbit hole yeah and there is an amazing compilation of all four of the cast members doing Charlie Rose interviews and he was so good I mean problematic person but like he was one of the legendary best interviewers of all time and he did a bunch of interviews with all four of them surprisingly naively for me coming in Jason Alexander is by far the best interview he is so articulate like incredible if you see him interviewed anywhere or talking talk anywhere like contemporaneously extemporaneously he is pretty legit yeah he is you would never know because he's so different than the George character yeah so different he's the biggest difference of all of them for sure have you seen that that bit on Curb on Curb Your Enthusiasm there's this like whole arc of the show about how like Jason Alexander is not at all like George and how dare you perceive him that way and then it's like Jason Alexander is insinuating to Larry David what a loser the George character is and Larry takes it personally because it's based on him right oh that's so great I should have said five Larry David is in this compilation of Charlie Rose conversations too yeah it's so good it's so good I think it's about an hour twenty total but it's worth it interesting Jerry's in there too Jerry's in there yep they're all in there interesting okay mine is a YouTuber named Whistlin Diesel have you guys heard of him no I'm not surprised I need to neither will anybody who is listening to this he creates it's like he's a kind of a car YouTuber but mostly he just does crazy stuff he lives in Tennessee and has a big property and like did you see that the thing that went viral like on Twitter and elsewhere of the Tesla that was on like twenty foot tall wagon wheels he like has done that he bought a Ferrari and put it in a one of those like bubbles that like boomers put inside their garages and then he just started throwing stuff at it like a ladder and like an axe and like a sledgehammer to see if it would like break the bubble and like damage the car he dropped a Mercedes G wagon through a house he got a he got a Chevy pickup with tires so big that he was able to drive it out into a bay in Florida oh my god he's the Mr. Beast of car he's the Mr. Beast of the car world sort of he's like it's like dude perfect on heroin right it's like that and he's like this he's like from Indiana and he lives in Tennessee so he's like just like kind of like backwoods dude but his channel's gotten so big that it's allowed him to do just dumb stuff and he's become my utter guilty pleasure because you put on his video and you're going to see like deep destruction of something that a lot of people hold dear and then you're going to see a lot of complaints in the comments of people being like I can't believe you would do that to a Ferrari oh my god as a YouTuber I also feel like this is like the greatest thing ever because he takes what the haters say and just like turns it up even more and I have to be like nice I'm so sorry sir you know I'm like running a business here he's like forget about these people I'm just going to blow it up he flew a helicopter inside of his garage what? that's a good episode I highly recommend oh I gotta watch that this is all just like trash TV but it is so good to watch so highly recommend I love that other people do this yeah right right I do wonder sometimes about like the danger of YouTube and like okay it takes now flying a helicopter inside your garage to get views like I started I had a Ferrari that was enough right and then like you must be you've talked about this a lot that like you feel we're going to do a whole nother episode of just you and us chatting but that like you started at a time and we started at a time where you didn't have to right I feel bad do this stuff like yeah with Slim Diesel's out there dropping G-wagons through houses oh my gosh it's a different thing but highly recommended it's great content that's actually a great Doug we have not talked about like everything that you do give us like a little bit of insight and I think David Tease we're going to do an interview together as a separate episode but like give us a little insight into the Doug DeMuro empire and what do you have going on and where can people check it out right I make a YouTube videos my channel is my name which has become very complicated now that I have a business on a channel also maybe regret doing that but I'm just Doug DeMuro and then I also run an automotive like a car auction website for enthusiast cars called Cars and Bids and we're selling something like 30 cars a day or auctions 30 cars a day on Cars and Bids right now yeah so all just all like enthusiast cars you know Porsches and BMWs and things of that variety you know the short version is like you are one of the most successful YouTubers in the world you are also an entrepreneur who built a tech marketplace internet marketplace business and just took a very large investment from the churning group one of the best investors in marketplace and content businesses out there incredibly impressive thank you for spending so much time with us doing this collab this is great so interesting this has been super fun it's really rare that we get to chat with somebody who is not an executive at the protagonist company and also deeply gets both the products and the kind of business aspect of something like I don't think there's anybody else we could have done this with maybe Vita King himself he would be a little biased I think yeah it's the bias that you got to worry about totally imagine yeah so thank you Doug yeah thanks so much thank you thanks for having me it was a lot of fun it really was prepping for this was so interesting learning all this history that I didn't know even having worked there it was great so fun thank you guys all right listeners now is a great time to talk about one of our favorite companies Statsig yes there is a reason why the best product teams rely on Statsig whether they are iterating on their core product features or shipping AI powered experiences at scale yep in the the crazy speed of today's AI world Shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. This is where StatSig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Check out our second show, ACQ2, if you want more Acquired. We just recorded a couple more episodes, actually, that we have getting ready to come out that I'm very, very excited about. That, of course, is a way for you to go deeper and nerdier into topics that just either aren't ready for the main show or perhaps are too current for the main show. And since what we try to do here is tell the big canonical stories, oftentimes there are stories in flight where we just want to talk to experts about what's happening, like Jake Saper in AI talking about what it's doing to the B2B SaaS landscape right now and where profit pools may emerge in that. Yeah, or Avla Koli, the CEO of AngelList. That was a great conversation with him. We had David Hsu from Retool. All the hits, David. We've got a Slack. We would love to see you there. We're going to be talking about this episode, acquired.fm slash Slack. And if you would like to come deeper into the Acquired Kitchen, you should become an LP, where we will, at least once a season, have you help us select one of the episodes. In fact, completely defer to you to select one of the episodes. And beyond that, we also will be doing bi-monthly Zoom calls, so we can get some feedback directly from all of you and get to meet more of you. So acquired.fm slash LP if you would like to become an LP. Now, with that, listeners, and a huge thank you to our partner in crime on this episode, Doug DeMuro. We will see you next time. We'll see you next time. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Huh.